The Jakarta Post, Jakarta

Former finance minister Bambang Sudibyo told legislators on Wednesday that the out-of-court debt settlement agreement signed in 1998 between former bankers and the government was legally flawed and there was no reason for the government to proceed with the policy to soften the debt repayment terms. He pointed out that the agreement popularly known as the MSAA (Master Settlement and Acquisition Agreement) or MRA (Master Refinancing Agreement) are inconsistent with the country's banking law. "The MSAA (or MRA) is legally flawed," he said during a hearing with the House of Representatives' Commission V on Industry and Trade Affairs over the government's controversial plans to be lenient on the ex-bankers with debt repayment to the state. The government plans to extend the repayment period to 10 years from four, and to lower the interest rate to nine percent. The new policy is seen as unfair to the millions of poor people who must suffer from the fuel price hike policy aimed at easing the pressure on the state budget, heavily burdened by the huge cost of bailing out the banking sector at the height of the 1997 financial crisis. The bankers owe the debts after they received around Rp 140 trillion (around US$13 billion) worth of liquidity support funds from the government to help their banks stay afloat in the wake of the financial crisis. A special team of ministers has been assigned to review the much-criticized policy. It will be completed by the end of next month. Bambang opposed the debt repayment extension policy. He said that the government should instead apply other laws to force the former bankers to settle their obligation immediately. "Do not be afraid, we still have other laws other than MSAA. We cannot let ourselves be fooled any more," he said. The House is authorized to block government policy as evidenced in the past when lawmakers canceled key privatization and asset sales programs including the privatization of cement giant PT Semen Gresik and the sale of Bank Central Asia (BCA). Some, however, fear that certain lawmakers might have been paid off by the former bankers, most of whom can easily afford it. According to the MSAA and MRA, the former bankers must repay their debts to the government by surrendering cash and fixed assets. The agreement also stipulates that the bankers would not be charged for crimes committed when most of their banks' money was channeled to affiliated businesses, thus violating the legal lending limit regulation. This is part of an out-of-court settlement. But the MSAA is inconsistent with the country's banking law, which stipulates that a violation of the legal lending limit is a crime. The ex-bankers including tycoons Sudono Salim, Sjamsul Nursalim, Bob Hasan, Usman Admadjaja and Hokiarto have so far declined to repay debts or surrender assets. In some cases, the assets surrendered were either those which had been pledged to other creditors or had little market value. According to the MSAA, the ex-bankers must settle their obligations by the end of November 2002. The new government policy would give them another six years to settle their debts. Separately, Speaker of the People's Consultative Assembly (MPR) Amien Rais warned the government not to proceed with the new policy, saying that if the plan were carried out the Indonesian people would bid farewell to the current government. "My worst fear is that the people will say good-by to the government if it insists on this plan," Amien said in Denpasar, Bali on Wednesday. Meanwhile, legal expert Denny Kailimang told The Jakarta Post that, instead of going soft on bad debtors, the government should use legal steps against them. "To this point, those bad debtors have never shown good faith, and IBRA has given them enough time to settle their obligations. So, why not go to trial over this?" said Denny, referring to the Indonesian Bank Restructuring Agency. He also expressed disagreement over an excuse that the government could only use civil law once in court. "The civil law only covers the debt-settlement matters. But if they are proven to have committed a violation of the contract, such as refusing to repay debt in the required period of time -- as they are at the moment -- the charges could be tried under the criminal code." Another lawyer, Pradjoto also shared a similar opinion, saying the planned move by the government would once again show that it was never serious in creating legal certainty.

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The Jakarta Post, Jakarta

Bank Indonesia will clear the status of Bank Prima Express and Bank Patriot in one or two days, to pave the way for the planned merger of five banks under the supervision of the Indonesian Bank Restructuring Agency (IBRA). Central bank Governor Sjahril Sabirin confirmed that the two banks would be allowed to join the merger scheme, along with Bank Bali, Bank Universal and Bank Artha Media. "With this, I hope the planned merger can go smoothly," Sjahril was quoted by detik.com as saying on Wednesday. Sjahril's statement should serve as a relief for IBRA, as the status of the two banks had been a cause for disagreement between the agency and the central bank, over whether or not the two banks were eligible to join the merger. Previously, the central bank was reluctant to give its approval on the IBRA-proposed merger, arguing that Prima and Patriot were in a poor financial condition and not qualified for a merger. In fact, of the five banks, only Bank Bali has the capital adequacy ratio (CAR) which managed to meet Bank Indonesia's minimum requirement of 8 percent. This should have led to liquidations. But with the merger plan, they have been spared the ax, with IBRA chairman I Putu Gede Ary Suta insisting that closing the two banks would only be an additional burden to the government. Meanwhile, State Minister of State Enterprises Laksamana Sukardi, whose office oversees IBRA, stressed that the agency would announce the merger plan process sometime next week. "Hopefully, the whole process of the merger can be completed soon," Laksamana said. The five banks are among the 11 private banks under the control of IBRA, who is responsible for leading the banks back into good financial shape, and returning them to the private sector. The merging of local banks is seen as part of efforts to restructure the country's troubled banking industry, which has been widely blamed for the country's poor economic performance. At the peak of the 1997 financial crisis, IBRA took over the banks after most of their loans turned sour.

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