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Bank Mandiri is to appeal a court ruling ordering it to pay
out Rp 1.02 trillion (US$112 million) to PT Timor Putra Nasional,
arguing that the money should remain frozen until such time as Timor
repays its debts to the bank.
The appeal will be brought in tandem with other legal efforts being
made the Finance Ministry in the same case, Mandiri president Agus D.
Martowardojo said.
"Mandiri will definitely file an appeal. Our lawyers are on the case,"
Agus was quoted by Antara as saying Friday.
"Safeguard the money, the Finance Ministry has told us, so an appeal it
is."
The Finance Ministry's secretary-general, Mulia P. Nasution, had
previously said the government would pursue all possible legal
recourses to overturn the ruling.
The Timor case goes back to 1997 when the government appointed the
company -- owned by former president Suharto's son, Hutomo Mandala
Putra -- to import completely-built-up sedans from South Korea's Kia
Motors, and simply rebrand them as Indonesian products to prove that
the country could establish its own automotive industry, producing a
so-called "national car" along the lines of Proton in Malaysia.
The Asian financial crisis that year, however, led to Timor being
strangled by cash flow problems. As a result, it was unable to pay its
taxes and import duties. In two operations, the first in July 2001 and
second in December 2003, the Finance Ministry's Directorate General of
Taxation seized Timor's assets and funds deposited in a number of banks
that later merged to form Mandiri.
Timor filed a countersuit against the tax office, and was rewarded by a
July 2004 Supreme Court ruling in its favor, ordering that the seized
assets be restored to the company.
After Mandiri refused to return the Rp 1.02 trillion, Timor brought an
action in the South Jakarta District Court, which ruled against Mandiri
on Nov. 21, ordering the bank to repay the money to Timor.
Both the Finance Ministry and Mandiri have objected to the court
rulings, arguing that the funds should remain frozen pending the
repayment of Timor's outstanding debts to Mandiri. Agus, however, did
not specify exactly how much Timor still owed Mandiri.
Supreme Audit Agency (BPK) Anwar Nasution recently said that his agency
was ready to launch an audit in connection with the case, while the
Corruption Eradication Commission (KPK) has said it has also commenced
an investigation for indications of graft. There have been no updates
yet on either of these efforts.
Meanwhile, State Minister for State Enterprises Sugiharto said the
dispute between Timor and Mandiri should be resolved in the courts, and
he was awaiting a report on the matter from Mandiri.
Separately, Mandiri chief financial officer Pahala N. Mansury was
quoted by Bloomberg as saying that Indonesia's largest lender by assets
would auction some Rp 15 trillion of bad loans owed by small borrowers
by 2008 to help reduce delinquent debt and increase profit.
Mandiri plans to sell Rp 3 trillion of debt from borrowers who owe less
than Rp 300 billion in the first half of next year, Pahala said.
With this, Mandiri expects its net non-performing loan (NPL) ratio to
further decline to 5 percent by the end of 2007, after improving to
14.33 percent at the end of 2006's third quarter from 15 percent at the
end of June.
The bank, with Rp 51.7 trillion of non-performing loans, also hopes to
sign revamp agreements with three of its biggest debtors next month.
The lender is working with some of its debtors to reorganize their bad
loans, including PT Raja Garuda Mas Group, a pulp and paper maker owned
by the country's richest man, the Argo Manunggal Group and the Domba
Mas Group. About 51 percent of the Jakarta-based lender's bad loans are
with 30 debtors.
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