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Asiaweek: At Last - Malaysia Focuses on Debt Restructuring
By Arjuna Ranawana

10/8/2001 8:50 pm Fri

[Malaysia sudah tiada pilihan lain melainkan menyelesaikan masalah hutang yang bertimbun yang sudah pun mencekik institusi perbankan di negara ini. Jika tidak, lebih banyak masalah akan menjelma nanti yang akan memudaratkan lagi ekonomi. Bank sudah tidak berapa sudi lagi memberi kerana sukar mendapatkan wang yang dipinjam oleh kroni yang tidakpun bersungguh mahu membayarnya nanti.

Sepatutnya kerajaan bertindak sejak dulu lagi tetapi itu tidak dilakukan kerana tidak mahu mengusik harta Umno dan harta hartawan Umno yang tersayang. Dengan keadaan pasaran saham yang muram dan bank tidak begitu ingin meminjam, syarikat-syarikat pro Umno semakin tertekan. Jika langkah kerajaan itu gagal juga menarik pelabur besar kemungkinan bom ekonomi akan meletup dan BN akan terhumban.
- Editor

Webfiles: At Last - Malaysia Focuses on Debt Restructuring

But if everybody doesn't play by the rules, there's more trouble ahead


Thursday, August 9, 2001
Web posted at 11:25 a.m. Hong Kong time, 11:25 p.m. GMT

With the departure from the scene of finance minister Daim Zainuddin, many market-watchers are expecting the restructuring of Malaysian corporate debt to speed up and become more transparent. In what appears to be the first step toward that goal, the newly appointed chairman of the Corporate Debt Restructuring Committee (CDRC), Azman Yahya, announced a new strategy August 9.

Azman's new rules specify that draft-restructuring schemes for indebted companies should be finished within three months of evaluation by his committee. He has also threatened to report to the Central Bank any bankers who miss restructuring meetings. Disciplinary measures could follow. To help end delays in the process, the new rules narrow down the companies affected to those with borrowings in excess of $26 million. And only 75% of creditors need to agree to any restructuring, eliminating situations where one creditor holds out for a higher payment and delays the entire process.

Azman, former head of the government's asset management company, Danaharta, warns that banks will have to take bigger haircuts. He says they have been getting "almost dollar for dollar" in the past. "We want them to be more realistic," he told a press conference Thursday. The indebted companies will also have tougher criteria to meet. Non-core assets would have to be sold off. None of the money realized from these sales can be used for new purchases that do not help the company. And corporations without viable prospects would have to go into receivership.

Azman, 37, has also changed the composition of the committee, bringing in representatives of bankers' associations -- including foreign banks -- as well as figures from the corporate sector. Market-watchers welcomed in particular the appointment of Megat Najmuddin Khas, a strong and persistent advocate of better corporate governance.

The economic crisis in 1998 left Malaysia's banks burdened with heavy corporate debt. By the beginning of 1999, some $17.1 billion of non-performing loans were up for restructuring by the CDRC. Of that, the authorities had dealt with $9.2 billion as of the end of last month. The rest remains unresolved and has been a drag on the economy and the market. Azman has ambitiously set himself a year or so to deal with this enormous amount of debt.

Why didn't the government carry out these tough measures before? There are a number of reasons. Most government advisors felt that the economy would pull out of the crisis quickly enough to allow corporations to recover and pay off their debts. Then there was the reluctance on the part of some regulators to take a tough line -- such as forcing companies to sell assets -- because some of them were seen to be linked to powerful political personalities such as Daim. In some cases, the CDRC's efforts to clean up corporate books don't seem to have worked. Debts of the Renong conglomerate, for instance, were restructured, but the company remains troubled. The government is likely to step into to acquire its biggest asset, United Engineers.

With the global slowdown and the decline in export earnings, Malaysia is not going to see strong growth for the rest of the year. Meanwhile, the stock market continues to slide and trading is very thin. Malaysia needs foreign and local investment, but that is unlikely to be forthcoming until there is proof the government is serious about debt restructuring and greater transparency. Can Azman do it? The task is fraught with danger, and it remains to be seen whether he is allowed to get tough with all the companies that need restructuring. If he is not, more trouble lies ahead for Malaysia.