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December 2009 in Review: A focus on Bank Century
The Bank Century bailout case remained the major focus during the close of 2009
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T
he Bank Century bailout case remained the major focus during the close of 2009. Unfortunately, scrutiny has focussed more on the government’s decision to bail out the troubled bank, than the pre- and post-bailout periods.
For instance, whether Century was already a troubled bank before the bailout decision was made and, if so, why was it allowed to continue operating. And after the bailout, why did the funds balloon to Rp 6.76 trillion, a sum far larger than the earlier estimate?
Some former senior officials have testified that they would have allowed the bank to fail given
that is not a systemic bank. Others have countered that the only safe way to close Bank Century, during those turbulent times, would be to have already in place, a blanket government guarantee on bank deposits.
Looking back to the 1997/98 financial crisis, it was because of such a blanket guarantee that the government was able to close a significant number of banks without causing a massive bank panic.
Source: Danamon Economic and Market Research
Dec.03: Largest steel mill planned
State steel producer, PT Krakatau Steel and South Korean steel giant Posco jointly plan to build a US$6 billion integrated steel mill capable of producing 6 million tons a year.
The joint venture will be owned 55 percent by Posco and 45 percent by KS. To fund the project, 70 percent will come from Posco and the remainder from KS. Plant construction will begin in August 2010 and is planned to be completed by 2013.
Iron ore for the plant will be sourced locally and from Australia, while most of the steel produced will be sold domestically.
Dec.08: APB buys Multi Bintang stake
Asia Pacific Breweries Ltd. (APB), based in Singapore and holder of Tiger Beer brand will purchase Heineken’s stake in PT Multi Bintang Indonesia and Grande Brasserie de Nouvelle Caledonie SA as it expands into the Indonesian and New Caledonian markets.
The purchase is valued at $348 million. APB is a joint venture between Singapore’s Fraser and Neave Ltd. and Heineken. APB, separately will sell its Indian brewery operations to Heineken for S$52 million.
Dec.11: Mulyani goes public
In an exclusive interview with the Wall Street Journal, Finance Minister Sri Mulyani said the Bank Century bailout investigations by parliament was an attempt to discredit her by politicians opposed to her reform agenda, notably Golkar party leaders including Aburizal Bakrie.
Sri Mulyani doesn’t expect a fair hearing, given that the inquiry is headed by Idrus Marhan, one of Aburizal’s closest aides. She also opposed the closure of Indonesia’s Stock Exchange (IDX) to halt a nosedive in Bumi Resource shares.
Source: Compiled by Danamon Economic and Market Research
Dec.14: Bakrie coal units hit by tax problem
The tax office under Sri Mulyani’s ministry of finance is investigating PT Kaltim Prima Coal (KPC), PT Arutmin Indonesia and parent company PT Bumi Resources, all part of the Bakrie Group, for possible tax evasion totalling around Rp 2.1 trillion (US$214 million).
Dec.15: Unilever not buying Sinar Mas CPO
Consumer products giant Unilever, the world’s largest user of palm oil, has decided to suspend purchases of palm oil from Sinar Mas Group until Sinar Mas can prove its plantations aren’t contributing to deforestation in Asia.
PT SMART, a unit of Sinar Mas provides about 5 percent of the palm oil Unilever uses in its products.
Dec.15: BPK says Century bailout illegal
The State Audit Agency (BPK) announced that the bailout process had no legal basis. BPK had problems with the legal formation of the Coordinating Committee that handed over the troubled Bank Century to the Deposit Insurance Corporation (LPS).
The head of the BPK is the former director general of taxes, and was replaced by Finance Minister Sri Mulyani with Darmin Nasution, currently the deputy senior governor of Bank Indonesia.
Dec.23: PLN gets new boss
Dahlan Iskan, the head of the Jawa Pos media group has been named to replace Fahmi Mochtar as the president director of state utility PT PLN.
The selection sparked controversy, given Dahlan’s position as the president director of two independent power producers, PT Cahaya Fajar Kaltim and PT Prima Electric Power, in Surabaya. PLN’s labor union also opposed Dahlan’s selection, citing that he was not competent to lead the company.
Dec.31: PLN doubling bond issue
State utility company PLN plans to double its bond issue program to Rp 3 trillion. The bonds will have a coupon rate of between 11 and 13 percent and are priced at a 1.5-2.75 percent spread above government bond rates.
The funds will be used, in part, for investment in transmission and distribution in 2010. To reduce subsidies on electricity, which for 2010 are budgeted to total around Rp 38 trillion, PLN is trying to reduce its oil-based fuel consumption at its power plants — from 35 percent to 20 percent.
Of the 30,000 megawatts of power PLN distributes though its grid, 76 percent is purchased
from PLN power plants, 21 percent from independent power producers and 3 percent from rented power stations.
