Government Prepares Management Contracts
Friday, 20 October, 2006 | 12:48 WIB

Tempo Interactive, Jakarta: The government is preparing management contracts with the board of directors of state banks for the settlement of non-performing loans (NPL) at the banks.

According to Deputy Economic Coordinating Minister for the Macro-Economy and Finance, Sahala Lumban Gaol, the management contract is aimed at making certain the banks follow the general professional standards and settle the NPL.

He said, with the management contract, the accountability and transparency of banks will be clearer. “The contract will only be a warning for banks in the process of the solution of NPL,” said Sahala yesterday (19/10).

As already reported, the government is also preparing an oversight committee, which later will decide which debts may be cut (haircut) and which may not.

“The management contract will be infrastructure for the oversight committee,” said Sahala.

According to Sahala, the management contract is not a new issue in Indonesia. Through its monitoring team, the government had a similar contract with general state banks. “ A management contract with the board of directors of state banks is actually a follow-up to this activity. This time, it is for debt solution,” he said.

Regarding the solution of NPL at state banks, State Minister for State Enterprises Sugiharto is not certain that the matter can be completed within two years.

“I’m not sure whether it can be completed in three months. Even next year it is not certain that it can be completed. But the solution is already far easier for banks,” said Sugiharto.

According to him, it is impossible that state banks can reduce NPL from 26 percent to five percent in a short time. Moreover there are still legal processes to be carried out , from scheduling, restructuring and the possibility of doing a haircut.

“That means, just because there is revised Government Regulation No. 14/2005, banks can take the easy way and wipe out their debts or delete their receivables,” said Sugiharto.

Kurniasih Budi and Agus Supriyanto
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