World Report

Billions of pounds recovered by IBRA were injected back into the economy

he Indonesian Bank Restructuring Agency (IBRA) has played a pivotal role in getting the country’s financial sector back on its feet after the 1997 crisis. The damage was substantial, but the organisation has worked ceaselessly to tackle the mountain of debt and non-performing loans that stacked up as institutions crashed.
A sure sign of the progress that has been made since then is that IBRA is finally closing its doors after transforming the fortunes of the sector. After seven years, its work to recover the fortune spent on propping up the country’s banks during the crisis is done. Billions of pounds have been recovered and injected back into the economy.

IBRA, charged with assisting economic recovery through bank and corporate loan restructuring, as well as optimising the repayment of state funds to reduce the burden of national debt, was one of the positive things to emerge from the collapse. Although Indonesians still face a multi-billion pound bill for the crisis, which devastated the economy and setback growth, the outlook today is very different.

After the government poured approximately £38 billion into the banking sector to prop up institutions on the brink of collapse, IBRA was tasked with taking over the banks, restructuring the assets and getting the money back. Although not all money was recovered, a substantial amount was, reducing the impact on taxpayers and easing the path ahead for banks to manage in the future.

The agency has been successful by adhering to strict international business principles, such as transparency and accountability. These qualities are now reflected in the local banking sector as a result of its efforts. The trickle down effect from IBRA is one part of a fundamental reform of the banking and financial sector that is continuing.
A major part of IBRA’s work was in the area of asset disposal, which realised significant revenues for the government. According to the 2002 operational report, the recovery rate from such asset disposals, excluding the divestment of bank shares, was calculated at about 34 per cent. When loan cash settlements are included, the recovery rate is closer to 42 per cent. The income was channelled into various government funds and programmes.
Between1998 and 2001, IBRA contributed a total of £5.5 billion to the government. The final figure at the time of closure is expected to be about double this.

The asset sale and divestment initiative also drew considerable foreign investor interest into Indonesian equities. Other divestments in 2004 should continue to attract strategic foreign investors with long-term interests in the country.