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Subject: IN: KMP - Total Bad Debt Reaches Rp 319.7 Quintillion
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Subject: IN: KMP - Total Bad Debt Reaches Rp 319.7 Quintillion
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INDONESIA-P
[Kompas Online]
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Thursday, 20 February 1997
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Total bad debt reach Rp 319,7 quintillion
Jakarta, Kompas
The amount of questioned credits at national banks presently amounts to Rp
31.8 quintillion. This amount is around 9.99 percent of the total credit of
Rp 319.7 quintillion which was paid out per November 1996. Of said amount,
questioned credits at government banks remain the major part.
Thus was disclosed at the work meeting of the Department of Finance led by
the Minister of Finance Mar'ie Muhammad with the National Budget Commission
which was led by the Chairman of the National Budget Commission I Gde
Artjana in Jakarta, Wednesday (19/2).
In that meeting the Board member of the Functional Group Fraction Tadjuddin
Nursaid conveyed that the National Budget Commission's rules of the order
with the Minister of Finance were not met.
Half of the commissions at the House of Representatives (DPR)
did not hold a work meeting with the related ministers. "Meanwhile it formed
the order rules which had to be performed before the National Budget
commission will hold a work meeting with the Minister of Finance. I don't
know why it was not done," said Tadjuddin when asked why it happened.
This was conveyed in relation with the many problems which arose on the
National Budget but which concerned the work of the other commissions with
the related departments which ironically did not give any imput.
The problem of questioned credits was again conveyed by the Director General
of the Financial Institute Bambang Subianto. Particularly for questioned
credits, of the amount of Rp 10.4 quintillion questioned credits, Rp 7.075
quitillion originated from government banks. In precentages, 67.90 percent
of questioned credits are at government banks.
If compared with the estimate of Booz & Hamilton some time ago which stated
that the questioned credits of national banks was around 4-20 percent, the
present questioned credits decreased drastically. The questioned credits are
divided into three groups, namely not so smooth credits, unsound credits and
bad credits.
The definition of bad credits, in brief is among others credits which for 21
months - after being classified as unsound credits - were not settled by the
client. Another definition of bad credit is, a credit which has been
submitted to the BUPLN (Body for Credit Matters and State's Auctions) or of
which substitution is requested to credit insurance companies.
While the definition of unsound credits are credits which still can be
saved, but of which the security value remains 75 percent of the total given
credit.
The category of not so smooth credits has as definition, credits which are
more than 1 month behind the due date, but has not yet passed 2 months. Or
it can also be credits which are 3 months behind since the due date but not
yet passed 6 months.
Details of National Bank Credits
per November 1996
Category % Total
quintillion Rp
Not so smooth credits 2.92% 9.3
Unsound credits 3.81% 12.1
Bad credits 3.26% 10.4
Smooth credits 90.02% 287.9
Source: Department of Finance 19-2-1997
Development of Bad
Credits in All Banks
Year Quintillion
1992 Rp 3.66
1993 Rp 5.9
1994 Rp 8.7
1995 Rp 8.8
1996 Rp 10.4
Source: PIK
It was not mentioned which economic sector most experienced bad credits. But
it is clear that the property sector has the most questioned credits.
According to the data of the property consultant Ir Panangian Simanungkalit,
Rp 5.2 quintillion of bad credits are from the property sector, based on
data which he obtained from Bank Indonesia.
And 1993 shows that the enterprising with the most bad credits, namely 40.6
percent is in the field of services like hotels, restaurants and trade. In
second order is the industrial sector of 29.1 percent, agriculture 6.8
percent, construction 6.8 percent and others 16.7 percent.
Bambang gave no details how the efforts thus far are to solve questionable
credits. but according to Kompas records the restraints in executing bad
credits is the condition that credits have no security at all and the fear
of legal actions which absorbs much time. In case there is a security, it
takes also time to sell it. To execute a security needs also a new investor
to buy it. This is no easy matter to be performed.
In overcoming the problem of bad credits, BI has also asked concentration of
bankings in the policy and procedure of bad credits. Also was suggested that
banks strengthened internal control. This is indeed still weak in banking.
To overcome questionable credits, a special team consisting of two directors
general of the Department of Finance and two directors of Bank Indonesia
worked since 1993 to put order in credit problems of government banks. This
team has as members the apparature of the Department of Finance and Bank
Indonesia.
Meanwhile, last month the Bank Indonesia Governor stated that one of the
methods to force the clients to pay credits is by prohibiting them to go
abroad.
Private money
At that occasion the Minister of Finance also described the payment problem
of government's foreign credits which according to the last data amounted to
54.6 billion US dollar. The Board member stated that if it was added with
private money. Indonesia's debt reached 110 billion US dollar, passing the
psychological figure of 100 billion US dollar.
At that moment Mar'ie stated that per January 1997 has been paid 803.5
million US dollar, February 1997 831.119 million US dollar and March 1997
will be paid 810.849 million US dollar. The total is 2.445 million US dollar
or Rp 5.698 quintillion. Of that total amount 29.6 percent is in form of
yen. The yen amount is equivalent to 724 million US dollar.
Mar'ie added that the appreciation of the US dollar towards the yen caused
that Indonesia's debt relatively decreased. He said that each time the rate
of the US dollar towards the yen increased with one yen, our debt decreased
with about 33 million yen
This is because Indonesia's debt in yen must be paid in US dollar because
that is the currency received from the incoming foreign exchange. But on the
other hand, if the US dollar decreases in value, the burden of our debt
payment also increased.
At that occasion Mar'ie Muhammad also talked about inflation, which was
attempted to reach 6 percent at the 1996/1997 fiscal year. Therefore the
community's requirements were attempted to be met so that no jump in prices
would occur.
He also promised completion of the EDI (electronic data interchange)
installation at the Directorate of Customs in July 1997. "It will have a
great impact on the efficiency of the customs' service for import and
export," said Mar'ie. It formed also a method to ward off the concern of
importers/exporters on the slowness and the many practices of illegal
collections at customs. "Don't be afraid," said the Director General of
Customs Soehardjo to all those entrepreneurs.(*)