Indonesia puts off BCA sale again


The BCA sale has been hanging over the Megawati administration since she was sworn in last year

By Alex Frew McMillan
CNN Hong Kong

JAKARTA, Indonesia (CNN) -- Worker demonstrations and the threat of a mass walkout has forced the sale of Indonesia's largest retail bank to be put off.

A decision on the sale of 51 percent of Bank Central Asia (BCA) had been expected as early as Monday. But a mass protest by thousands of bank employees that started Monday has forced a postponement.

No winner will be announced Tuesday, sources in the office of Laksamana Sukardi told CNN. There is no date set for an announcement.

The bidding has come down to two companies, with Standard Chartered the clear favorite and U.S. investment group Farrallon Capital Management the dark horse.

Standard Chartered says it has had no official word on when a decision might come. Farrallon has no experience running a retail bank, and its critics have painted the U.S. company as a "vulture capitalist" looking to pick up cheap assets.

A U.S. bidder also carries a political charge in Indonesia, the world's most-populous Muslim nation.

Explanation to workers

Both bidders say they will run the bank by strengthening existing management plans. Farrallon has promised not to cut jobs for two years, a claim StanChart has yet to match.

Laksamana's office has stated that the sale will not be finalized until workers have been briefed on the details. Key among those, according to the minister's office, is that there will be no job cuts or management changes accompanying the sale.

With rumors of a completed sale swirling, around 4,000 BCA employees protested it on Monday. They threatened to strike if the sale went through to an overseas company, expected to be more ruthless when it comes to slashing costs.

"We intend to communicate to the employees and then we will see how conditions develop," Laksamana said on Monday, according to the Kompas newspaper.

Sources close to the deal say political infighting between Laksamana and the chairman of the Indonesian Bank Restructuring Agency (IBRA), I Putu Gede Ary Suta, have also contributed to the delay.

Political infighting

The Indonesian government had pledged to complete the sale in December but missed that deadline.

Laksamana, as minister of State Owned Enterprises, has oversight over IBRA, the main reform body in the country. Indonesia nationalized many of its banks after the Asian financial crisis of 1997-98.

But IBRA had been responsible for the BCA sale, and controls 60.3 percent of the bank. Last week, Laksamana appointed an outside board of four to review it in the interest of transparency and fairness.

Both men continue to say the rules support their authority. Though the exact announcement procedure has yet to be settled, speculation is that IBRA will have the final say, with a panel reviewing the decision. The cabinet of President Megawati Sukarnoputri would then stamp it.

BCA has around 8 million customers in Indonesia, the bulk of the banking public. So the sale hits many households.

It would also bring much-needed money to Megawati's cash-strapped government. The sale is expected to raise around $450 million.

Before the International Monetary Fund approves its next installment in a three-year, $4.5 billion loan program to Indonesia, it has demanded progress on six fronts, the BCA sale among them.

The fund has also pushed Jakarta to sell a majority share in Bank Niaga.

Indonesian stocks are down 1.07 percent in Jakarta after the postponement. But that is in line with other Asian markets. Japan's Nikkei index closed down 2.6 percent.

CNN correspondent Atika Shubert contributed to this story.