Robert Go, Jakarta – The Indonesian government yesterday threw out a controversial plan to allow some of its biggest debtors more time to repay money, and instead demanded full settlement, within four months, of the nearly US$10 billion (S$18.3 billion) that is still outstanding.

The move could spark greater support for Jakarta from the International Monetary Fund (IMF) and foreign investors, who still view the country's ability to enforce laws and fight corruption with scepticism.

But there are already doubts about the government's ability to actually recoup the funds, given that most major debtors have strong political connections and have eluded the state's collectors successfully over the past four years.

Following a Cabinet meeting, Coordinating Economics Minister Dorodjatun Kuntjoro-Jakti said: "The government has decided to revoke the decision to extend the debt-repayment terms. We should stick to the existing agreement."

Mr Mahendra Siregar, one of Mr Dorodjatun's key advisers, said: "The message is 'No more Mr Nice Guy'. We realise the need to enforce these repayment terms. Foreigners should see soon how serious we are on this issue."

According to Mr Mahendra, Jakarta's legal advisers will evaluate 33 major debtors, who together received 130.6 trillion rupiah (S$24 billion) from the government four years ago but have paid back only around 32 trillion rupiah so far.

After a one-month evaluation process, some debtors will be classified as cooperative and allowed to continue their respective repayment programs. But those deemed non-cooperative would be forced to pay up during the next three months, or face "stern action", including bankruptcy lawsuits and asset seizures.

Given that only one major conglomerate, the Salim Group, and a handful of smaller debtors have actually started repaying the government, Jakarta could be taking legal action against a large number of recalcitrant debtors by July. The debtors have been forced to pledge many of their assets to restructuring agency Ibra as collateral.

But Mr Dorodjatun has said these are worth only about 30 per cent or less of the outstanding loans. Earlier in December, Ibra proposed extending repayment terms, many of which expire this year, for major debtors until 2010. Critics charged the Ibra action would represent yet another "sweetheart deal" extended to conglomerate families at the expense of regular taxpayers.

The IMF has also warned Jakarta to proceed cautiously and transparently in its dealings with the debtors, who are rumored to command instant access to Ibra officials and other high-level government figures.

The IMF's top man in Jakarta, Mr David Nellor, told The Straits Times: "We are encouraged Jakarta is finally developing a strategy that will increase legal certainty. It is an important step to focus on debtors' compliance and defining the terms of repayment." But he also added the IMF and other foreign lenders would 'watch carefully how this plan is implemented over time'.

Domestic observers, however, are less diplomatic. Mr M. Ikhsan, head of University of Indonesia's Institute for Economic and Social Research, said: "The chance of legal action taken against debtors is less than 10 per cent. any are sceptical there is enough political will to punish debtors. There are still too many closed-door meetings between officials and conglomerates."