Corporate debt and the Indonesian forestry sector
2002
Barr, C. | Brown, D. | Casson, A. | Kaimowitz, D.
The Indonesian Bank Restructuring Agency (IBRA) holds US$ 4.1 billion in loans related to forest and estate crop activities, of which US$ 2.7 billion are nonperforming. Ten large conglomerates account for over 70% of the bad forest and estate crop debt. These groups are also responsible for some US$ 2.4 billion in domestic nonperforming loans in other sectors and US$ 15 billion in offshore debt. The current high level of non-performing loans stems, in large part, from the failure by banks to exercise due diligence (i.e., seriously assess the potential for loan default) when Indonesia’s forest-linked conglomerates sought to borrow funds prior to the crisis. Direct government subsidies for forest and estate crop activities also encouraged corporate risk taking. Strong evidence suggests that debt write-offs and loan restructuring may provide Indonesia’s forest-related industries with a substantial capital subsidy. This study projects that IBRA will eventually write-off US$ 1.3 – 1.9 billion of debts associated with timber, wood processing, pulp and paper, and oil palm investments. Debt write-off on this scale, together with IBRA’s current lack of supervision over the forest-related companies that owe it large sums of money, will serve as an impetus for debtor firms to continue to engage in practices involving an inordinate degree of financial risk.
显示更多 [+] 显示较少 [-]