[Kabar-indonesia] State banks to get help with bad loans: Boediono

[JoyoNews at aol.com]

The Jakarta Post
Tuesday, October 3, 2006

State banks get help with bad loans 

Urip Hudiono, The Jakarta Post, Jakarta

The government has revised a regulation on state assets that has been keeping 
state lenders from quickly resolving their non-performing loans (NPLs).

Coordinating Minister for the Economy Boediono confirmed that President 
Susilo Bambang Yudhoyono approved amendments last week to a 2005 government 
regulation on the settlement of claims by state-owned enterprises (SOEs), including 
loans disbursed by state lenders. 

"The main point of this (revision) is that it will provide the necessary 
basis for 
state-owned banks to improve their NPL levels," Boediono said Tuesday. 

The amendment came after the Supreme Court issued a ruling on Aug. 16 that 
found the assets of state firms, including state banks, are regulated by related 
laws on private companies and that state firms are considered separate from 
the state budget. The government had asked for the court's take on the issue. 

The revision gives SOEs more flexibility to manage their assets. State banks 
will be able to take prompt management-level actions to resolve NPLs, such as 
rescheduling them, or providing debt reductions and write-offs, simply on 
approval from their shareholders. 

This will put state lenders on a level playing field with private banks, 
since they will no longer have to go through the sometimes lengthy bureaucratic 
procedures required to get approval from the Finance Minister and House of 
Representatives to resolve their NPLs. 

The banking industry's net NPLs as of June stood at Rp 66.3 trillion (US$7.2 
billion), or 8.8 percent of total disbursed loans so far, data from the 
central bank shows. This surpasses Bank Indonesia's 5 percent maximum net NPL level. 

State-owned Bank Mandiri, the country's largest lender by assets, had a 14.7 
percent net NPL level from its Rp 100 trillion total lendings, even after its 
management took the unusual step of publicly announcing its debtors and urging 
them to immediately resolve their loans. 

Bank Negara Indonesia, the second largest lender, had a net NPL level of 11.2 
percent of its Rp 60 trillion total lendings. 

Boediono explained that an oversight committee will also be established for 
all state firms, including banks. 

"This oversight committee is an important and crucial part (of the revision). 
It will strictly supervise all corporate actions taken by the management of 
SOEs, to ensure their accountability," he explained. 

Finance Minister Sri Mulyani Indrawati said the revision would not hamper 
current or future probes of corruption allegations at SOEs. 

She did not elaborate. 

Analysts had said that although the amendment may help state banks, it also 
had the potential to derail the country's anti-corruption drive, because 
criminal corruption cases involving the use of state assets could become civil 
cases. 

The Attorney General's Office has submitted an inquiry to the Supreme Court 
on the issue. 

The high NPL level in the industry-dominating state banks has made their 
managements reluctant to disburse more loans lest they face charges of causing 
state losses. That has in turn contributed the country's slow rate of economic 
growth. 

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Joyo Indonesia News Service
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