U

nder a draft law to manage state credit, the government will soon be able to imprison bad debtors without undergoing a judicial process, a senior finance official says.

This would be a breakthrough for the government as many bad debtors had not shown good faith in repaying their debts, Finance Ministry state assets director Hadiyanto said in Jakarta Wednesday.

The new authority is part of a draft law due to be submitted to the House of Representatives later
this year.

“It will have a deterrent effect on bad debtors,” Hadiyanto said, adding that the new law would replace the 1960 Law on State Credit Management.

Separately, state credit director Soepomo said the government faced many difficulties in collecting unpaid debts because debtors used many different approaches to avoid repaying their debts.

“Under the proposed law, we will have a stronger legal umbrella to deal with bad debtors,” he said.

According to the Finance Ministry, the state credit committee (PUPN) is managing Rp 62 trillion worth (US$6.94 billion) of bad debts, comprising Rp 20 trillion from state-owned banks, Rp 1.1 trillion from state-owned companies, Rp 9 billion from state institutions and Rp 41 trillion from governmental institutions.

About Rp 30 trillion of the amount due from governmental institutions is owing from the now-defunct Indonesian Bank Restructuring Agency (IBRA) debtors, including businessmen Samadikun Hartono and Kaharudin Ongko.

The IBRA was established in 1998 to restructure the national banking system following an economic crisis that caused several of Indonesia’s banks to fail.

One of the agency’s tasks was to manage the distressed assets seized from financially troubled banks.

In February, 2004, the IBRA was shut down and handed over all of its assets and documentation to the Finance Ministry.

Apart from tougher law enforcement, Soepomo said the government could offer conditional debt abolishment to cooperative debtors.

“We may give conditional debt abolishment to debtors who are found to be unable to pay their debts,” he said.

However, decisions to give such a facility should be made carefully.

With the new law, the government was upbeat it could collect most of the Rp 62 trillion in unpaid debts by 2014, Soepomo said.

“It won’t be achieved without tougher law enforcement on bad debtors,” he said.

Many bad debtors, especially ex-IBRA debtors, had left Indonesia since the Asian financial crisis of 1997-1998, which had led to the collapse of several private banks.

Samadikun, for example, has been on the police’s wanted list since that time.

Many other bad debtors said that they were unable to pay their debts, while in fact, they have many assets in foreign countries. (edf)