Short list on Indonesia sale scrutinized


Laksamana Sukardi championed the BCA sale as the return of overseas cash, but the Niaga bidding is almost all Indonesian

By Alex Frew McMillan
CNN Hong Kong

JAKARTA, Indonesia (CNN) -- After the successful sale of the country's biggest bank, Indonesia is pushing ahead with the privatization of PT Bank Niaga.

But scrutiny already attends the bidding, as it did with Indonesia's sale of a majority stake in Bank Central Asia (BCA).

ANZ Banking Group, one of the named bidders, confirmed on Wednesday that its bid is in fact on behalf of Indonesian bank PT Panin.

"We'll be looking at offering technical assistance, there is a variety of other roles we could play," ANZ spokesman Paul Edwards told CNN.

Melbourne-based ANZ bought 11 percent of Panin in 2000 and has an option to buy up to 29 percent.

But ANZ is only advising on the Niaga deal and is not contributing financially.

"In a financial sense, at this stage it would be something that Panin would organize," Edwards said.

That means three of the four bidders for Niaga are Indonesian. It contrasts with the BCA sale, which politicians championed as an influx of overseas capital (full story).

ANZ not expanding in Indonesia

ANZ operates Main Street banks under its own name in Vietnam, China, the Philippines and Singapore. But it is not planning a retail network of its own in Indonesia.

"We're conscious to pace our involvement in Asia very carefully, given the risks," Edwards said, adding that ANZ would expand in Indonesia through Panin's organic growth or by buying more of Panin.

The International Monetary Fund last year blamed stalled bank privatization last year in pulling its loan program in Indonesia.

But the Indonesian Bank Restructuring Agency (IBRA) completed the sale of a majority of BCA, Indonesia's largest bank, in March and is now conducting the second sale, of 51 percent of Bank Niaga.

Indonesia took over Niaga, a midsize player in banking there, in the late 1990s.

IBRA said on Tuesday it has whittled six bidders down to a short list of four.

They are all consortiums, led by ANZ Banking Group; Commerce Asset-Holding Berhad Group, a Malaysian group; Victoria International Bank, a fairly small Indonesian bank; and Indonesian fund Batavia Investment Fund II, which also took part in the winning bid for car maker PT Astra two years ago.

Winner expected in June

IBRA chairman I Putu Gede Ary Suta intends to declare the winner in the third week of June. Meantime, the agency will conduct due diligence and hear how the bidders plan to manage Niaga.

There will be heavy scrutiny of the bids. Dark horse U.S. hedge fund Farallon Capital Management won the race for BCA, the country's largest retail bank.

Investors as influential as Mark Mobius, president of the Templeton Emerging Markets Fund, still question the decision.

"Standard Chartered would have been a better buyer," Mobius wrote in an e-mail to CNN. "They would have bought overseas discipline and expertise to the Indonesian banking sector and they were willing to pay a higher price! So why did it go to Farallon? Will this eventually end up in the Salim camp? Hmmm ..."

Fewer strings attached

Critics contend that BCA's former owner, the Salim family, may ultimately buy back BCA. Financiers say Farallon, led by former Goldman Sachs bankers, has a short timeline and a defined exit strategy that will likely see it sell BCA within two to three years.

Farallon, which has never run a retail bank, edged out British bank Standard Chartered, which has extensive Asian bank operations.

Indonesia encouraged bidders to place as few restrictions on BCA's operations as possible. Sources involved in the deal tell CNN that Farallon won because its bid lacked strings.

The Indonesian government took over almost all the country's banks in the wake of the Asian financial crisis. In the cleanup, it transpired bankers abused the vast majority of bailout loans from groups like the IMF.

An IMF stipulation

Though the country now appears on surer economic footing under President Megawati Sukarnoputri, skeptics worry that Indonesian banks' old owners will try to claim them back in the open market.

The IMF, which set a schedule for selling off BCA and Bank Niaga in renewing its loans, praised the completion of the often-delayed BCA sale, in which Indonesia missed several self-imposed deadlines.

The Paris Club of creditors last week rescheduled $5.4 billion in debts, which many observers have taken as a sign of approval of the reform process.

Bank Niaga stock was trading down 14.7 percent at 145 rupiah late on Wednesday, after gaining over 25 percent in the month running up to the sale. Jakarta's overall stock market was down 1.69 percent late Wednesday.