StanChart favored as BCA sale nears


The BCA sale would provide needed cash to Indonesian President Megawati Sukarnoputri's team

By Alex Frew McMillan
CNN Hong Kong

JAKARTA, Indonesia (CNN) -- The sale of a majority stake in Indonesia's biggest retail bank may come as early as Monday.

Local media are reporting that the Indonesian government is prepared to announce the winner in the bidding for Bank Central Asia (BCA) early this week.

There are two bidders left in the running, with British-based bank Standard Chartered the clear favorite.

The other bidder, American investment group Farrallon Capital Management, has no experience running a bank and limited business experience in Asia.

Standard Chartered, on the other hand, narrowly missed out in the running for Bank Bali in 1999. It also has extensive Asian operations, including a large retail banking operation in Hong Kong.

Political infighting holding up sale

But with a political battle under way in the Indonesian government, the exact timing of the announcement is unclear.

There is also the threat of strike action from bank workers opposed to the sale. Wire reports from Jakarta Monday said workers are protesting the lack of information about what will happen to them if the sale goes through.

The announcement has already been pushed back numerous times and Indonesia missed a firm, self-imposed deadline to complete the sale in December.

The International Monetary Fund has frequently repeated that the BCA sale, as well as the sale of a majority stake in Bank Niaga, must go through for Indonesia's $4.5 billion IMF loan program to continue.

The sale would also raise much-needed cash for Indonesia, with analysts expecting the government to reap up to $450 million from selling 51 percent of BCA. The Indonesian bank restructuring agency, IBRA, now controls 60.3 percent.

The minister of State Owned Enterprises, Laksamana Sukardi, said last week that he expected the sale to go through by the end of last week. It did not.

IBRA was initially in charge of the sale. But also last week, Laksamana set up an independent body of four to decide the sale in the interest of fairness and "transparency." IBRA falls under the minister's oversight.

Face saving step for IBRA

But the chairman of IBRA, I Putu Gede Ary Suta, countered that he should supervise the sale. Both men claimed government regulations support their case.

Now industry watchers speculate the decision on the sale will be made by IBRA, with independent review by Laksamana's appointees and a likely cabinet stamp.

That compromise is a face-saving step for the IBRA chairman, who was unhappy at being stripped of his decision-making role in the sale, a source close to the negotiations told CNN.

The Jakarta Post reported Monday that the creation of the panel amounts to a "stripping of power" away from IBRA. Critics had feared the sale under IBRA would not be fair and that the bank would even land in the hands of its old owners, the Salim family.

Standard Chartered says it is not sure of the timing of any announcement.

"We still don't have any idea yet," Aikwei Wong, spokeswoman for Standard Chartered, told CNN from Jakarta. "I wish I did."

Both Standard Chartered and Farrallon say they will leave the bank to operate under its current name. Farrallon has also pledged not to cut any jobs for the next two years.

Standard Chartered has not matched that offer, but promises to help the bank to run better under plans laid by its current management.

"Our position really is that we will be guided by the plans that are in place by the current management," Wong told CNN.

According to a wire report, BCA workers opposed to the sale began protesting Monday and are threatening strike action. About 6000 workers reportedly gathered at the bank's headquarters ahead of a planned five-day strike.

The details of both the Farrallon and the Standard Chartered bids are closed.