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Indonesia faces fury over loans



By Yenni Kwok

JAKARTA, Indonesia (CNN) -- The Indonesian government is facing a flood of criticism as it prepares to extend debt payments for delinquent bankers.

A government committee of senior economic ministers voted in December to extend repayments for former bank owners to 10 years, from four.

But a scuffle has broken out among president Megawati Sukarnoputri's economic team about whether to implement that plan. The International Monetary Fund has reportedly insisted it be put off.

Crunch time could come as early as tomorrow. The Coordinating Minister for the Economy, Dorodjatun Kuntjoro-Jakti, said the government hopes to reach its decision on Friday.

An Asian crisis bailout

At the peak of the economic crisis in 1997, the government spent billions of dollars bailing out its banks.

But estimates suggest some 96 percent of the emergency loans were abused, or around 138.4 trillion ($13.3 billion).

Bankers who extended loans to lenders beyond legal limits, or otherwise misused the central Bank Indonesia's emergency money, agreed in 1998 to pay back their loans in four years.

The majority of the bank owners lost control of their banks in the aftermath of the crisis. Still, the due date for many of those loans expires in the middle of this year.

But with a paltry rate of repayment so far, the former bankers still owe the government at least $10 billion. Those former bankers who refuse to pay or fail to comply would be categorized as noncooperative debtors.

They would be forced to surrender companies and other assets to the Indonesian Bank Restructuring Agency (IBRA) and could even face prosecution.

Heated debate

A committee reviewing the finance sector voted to extend the program, from 4 years to 10 years, and lower interest rates, to a minimum of 9 percent, down from 17 percent now.

Some see that as yet another bailout of former bankers who had strong political connections when they landed loans and many of whom still command business empires.

"This is not a credit-restructuring program such as the Paris Club," economist Faisal Basri said. "The tycoons have violated the law, and now they have the responsibility to pay what they owe."

Among the businessmen affected under the schedule are: Mohamad "Bob" Hasan of Bank Umum Nasional and Sjamsul Nursalim of Bank Dagang Nasional Indonesia.

The plan has caused heated debate within the cabinet, because not all ministers agree with the proposal.

The head of the National Planning Agency, Kwik Kian Gie, even openly rejects the plan.

Minister: bankers should be arrested

Kwik this week asked for the extension to be cancelled because of public opposition, according to Koran Tempo newspaper.

He reportedly suggested the government turn the bankers over to the police, confiscate their assets and take over their businesses.

But Jakarta has had problems selling off other companies that IBRA controls, and some have been sold at bargain-basement prices.

IBRA supports an extension, noting that almost all bankers were not cooperative, and most IBRA-filed lawsuits ended up in favor of the debtors.

The man charged with leading Indonesia's reforms characterizes the plan a little differently, in light of criticism.

"We agree that we will not give an extension of the shareholders' settlement program, but a revision," Laksamana Sukardi insisted this week.

Sukardi is leading key reforms such as the long-delayed sale of a majority of Bank Central Asia, the country's biggest commercial bank. As minister of state-owned enterprises, IBRA falls under his control.

The agency hopes a commercial approach instead of a legal one will encourage debtors to pay.

Meanwhile, Kuntjoro-Jakti confirmed that an IMF team would discuss the plan when it arrives in February.

"It is just for consultation," the minister said, denying that the IMF will take an active role.

The IMF suspended aid to Indonesia under Megawati's predecessor, Abdurrahman Wahid, frustrated with an almost total lack of reform progress.

But it has resumed its $5 billion loan program, after Megawati's new government agreed to a reform schedule. The IMF is sending a team of senior officials to review that progress in February.

Raden Pardede, economist of the Danareksa Research Institute, feels the government should not grant a blanket loan extension. That would be unfair to bankers who have paid their dues, he added.

"It should be a case-per-case basis," Pardede said. "For example, Salim Group has done something, they are considered the best among the worst."

There are already accusations of favoritism. Last December last year, Nursalim asked IBRA for an extension on his ex-bank's debts, from four to 12 years.

"The government's plan to extend the debt program is the same or nearly the same with the request of that one tycoon," Basri said.



 
 
 
 



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