Bill Guerin, Jakarta – Though now defunct, the Indonesian Bank Restructuring Agency (IBRA) remains prominent in the current two-month changeover period to a new way of managing debt restructuring and asset sales.
A new Assets Management Company (AMC) took over the function of IBRA when the latter closed shop at the end of last month. It is tasked with managing and restructuring IBRA's remaining assets, worth some Rp40 trillion (US$4.6 billion).
It needs money to get on with the job. Though the new company will get Rp300 billion ($35 million) in operational funds from the Ministry of Finance, already agreed by the House Commission IX for financial affairs, disbursement still needs majority approval from the full House of Representatives, which is currently in recess until after the April 5 legislative elections.
Help was on hand, though, from IBRA. The agency this week transferred a total of Rp150 billion ($17.5 million) to its successor in the form of a loan.
"The sum can hopefully be used by AMC to start its operations," IBRA chairman Syafruddin A Temenggung said on Tuesday, adding that IBRA would eventually return the repayment to the Ministry of Finance as part of IBRA's additional revenue to the state.
Temenggung, who took over at IBRA in April 2002, heads a team of some 100 former IBRA employees given until April 30 to hand over to the new company.
He said IBRA still controlled funds of about Rp3 trillion to Rp4 trillion, which would be transferred to the Ministry of Finance in April. This is apart from the Rp5 trillion IBRA generated from sales of assets under its control and delivered to the government to support last year's state budget.
AMC is under the supervision of the Ministry of Finance, unlike IBRA, which was controlled by the Ministry of State Enterprises. Also unlike IBRA, it will have no fiscal targets to meet. However, it has plenty of work ahead to sort out the unsold assets IBRA handed back to the ministry. These are in the form of shares in banks, non-performing loans and property and shares in a number of companies.
IBRA transferred assets with an estimated market value around Rp15 trillion ($1.75 billion). The new Assets Management Company, which has a five-year tenure and is led by a senior ex-IBRA official, will manage assets with a total market value estimated at Rp10.8 trillion. These are assets deemed "free and clear" in terms of legality, though their book value is some Rp108.5 trillion.
A special top-level clearance team will manage the remainder before being submitted to the Assets Management Company. The team will be chaired by Finance Minister Boediono, with State Minister of State Enterprises Laksamana Sukardi as vice chairman, and National Police Chief Da'i Bachtiar, Attorney General M A Rachman and Minister of Justice and Human Rights Yusril Ihza Mahendra as members.
The new arrangements are all covered by presidential decrees. Six years after a Suharto presidential decree set up IBRA in February 1998, a presidential decree from Megawati Sukarnoputri officially closed the agency this February 27. Another decree established the "clearance team" for six months, and a third authorized the continuation of the bank blanket-guarantee program.
The presidential decree allowed for six months for the clearance team to settle IBRA's affairs. If at the end of the period the team has not finished its tasks, the government will approve an extension for as long as necessary.
Boediono wants the state budget funds, which will be returned before the end of the year, from part of the proceeds raised from the sale of the assets, as quickly as possible. This is to maintain and manage the assets to prevent their value from declining and to protect them from being "looted", as the minister put it.
The government has asked the Supreme Audit Agency (BPK) to audit the assets transferred from IBRA, but Boediono told legislators that the Assets Management Company would start selling them straight away to avoid a further decline in the value of their assets, though he promised there would be no fire sale. Some former bank owners have been cleared of criminal charges, despite their violation of banking regulations and their alleged misappropriation of the bailout funds.
The government injected Rp144.5 trillion (some $17 billion at today's value) in emergency liquidity funds to banks to bail them out in the wake of the late 1990s financial crisis.
Some 35 bank owners have been charged with violating banking regulations, mainly by channeling depositors' money to affiliated business groups, which hastened the collapse of the banks and forced the government to bail them out.
As IBRA struggled to get to grips with the scale of it all, credit assets were bought back by previous owners with hardly any capital.
IBRA had already awarded debt free status to nine ex-bank owners, including Anthony Salim, the former owner of Bank BCA and the largest debtor. Last week four more were given a clean bill of health by the still powerful Financial Sector Policy Committee (FSPC) established by a presidential decree in 1999.
To repay their debts, bank owners surrendered cash and assets to IBRA, but most assets were found to have much less market value than claimed. In the Salim case, for example, IBRA collected around Rp20 trillion from the sale of shares in 108 companies surrendered by Salim to pay off his Rp52.7 trillion debt to the state.
This frees the ex-bank owners from any legal action for possible banking crimes committed in the past.
The Supreme Audit Agency (BPK) has deployed no fewer than 30 auditors to examine the performance of IBRA. The auditors have been investigating IBRA's performance for 14 months so far and will eventually follow this with an audit of the agency's final balance sheet.
Boediono admits the results are eagerly awaited. If these audits uncover any improprieties, then a further transparent audit investigation is to be carried out. Because of the corrupt legal system the agency preferred to seek out-of-court settlements, and there are still 1,361 unsolved legal cases, the majority of which center on asset disputes. The cases are worth a total of Rp25 trillion and involve 447 debtors.
Other unfinished business includes the liquidation of closed down banks, resolution of the Shareholders' Liability Settlements (PKPS) of banks that were closed down by the government as well as the settlement of ongoing business transactions.
To provide some assurance for bankers and their customers, IBRA's role in the government's bank deposit guarantee program will be taken over by a new institution under the Ministry of Finance.
This is a temporary measure, pending the planned establishment of a full-blown deposit-guarantee agency.
As for IBRA, more than 70 percent of its 2,500 employees have been absorbed into the new asset-management body and top officials have been snapped up by other companies. Temenggung is now a member of the Pertamina board of commissioners and his deputy, Sumantri Slamet, has landed on his feet with a vice president commissioner post at Bank Internasional Indonesia.