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Banks, Indonesia Working On Bailout Details


Bankers and Indonesian government negotiators were searching for a broad agreement on a bailout plan for Indonesian businesses owing nearly $80 billion to foreign lenders.

The parties continue to talk and review the proposal presented by the Indonesian group, said Andy Tuck, a spokesman for Chase Manhattan Corp which is co-chairing the talks at its Manhattan headquarters with Germanys Deutsche Bank AG and Japans Bank of Tokyo-Mitsubishi Ltd.

At this point, everybodys meeting, everybodys talking, and were not divulging any details, he said.

The negotiators were considering a plan put forth by the Indonesian government that would extend private debt payment schedules by up to eight years, said a source familiar with the talks.

The proposal also would establish a government-backed fund to guarantee repayment, the source said.

The International Monetary Fund has offered technical assistance to manage the programme.

Scores of Indonesian companies are technically bankrupt, and are unable to meet payments on loans made in foreign currencies because of a dramatic fall the value of the rupiah.

The rupiahs collapse last July has resulted in soaring inflation and mass unemployment, and has led to student protests and some rioting.

Indonesias central bank said in Jakarta recently that the countrys total external debt as of April 3 was $133.7 billion. It said corporate foreign debt was $80.2 billion.

This included $67.7 billion owed by the private sector as well as $12.5 billion owed by state-controlled enterprises, some of which are part privately owned or have been earmarked for privatisation. The central bank said the government owed $53.5 billion in long-term loans.

The proposal under discussion is modeled on the so-called Ficorca plan, established for Mexico in 1983, which established government guarantees for private debt, and set a trading range for the local currency to protect investors from sharp fluctuations in foreign exchange rates, the source said.

A debt restructuring agreement is necessary to back up a $43 billion bailout for Indonesia, agreed to last week with the IMF. The deal requires Indonesia, the worlds fourth-largest economy, to dismantle most monopolies.

In addition to the big three banks leading the New York talks, 10 other institutions taking part were The Netherlands ABN Amro, Bank America Corp., Banque Nationale De Paris, Citicorp, Hong Kong Shanghai Bank, Korea Development Bank International, The Overseas Chinese Banking Corp., Japans Sanwa Bank Ltd and Sumitomo Bank Ltd, and UKs Standard Chartered Bank.

A nine-member team representing the Indonesian government is chaired by a former finance minister Radius Prawiro.

First Published: Sat, April 18 1998. 00:00 IST