Bank Niaga sale faces delay


Laksamana Sukardi praised the BCA sale as a sign overseas interest has returned to Indonesia

By Alex Frew McMillan
CNN Hong Kong

JAKARTA, Indonesia -- The privatization sale of Bank Niaga has failed due to lack of interest, according to a report.

Only two teams bid on the bank -- one from Malaysia's Commerce Asset-Holding Berhad and one from Indonesia's Panin Bank, backed by the Australian ANZ Banking Group.

Indonesia rejected the offers of two other bidders because their plans did not meet standards.

On Thursday, Indonesia confirmed it has received low bids for the sale, though it has not decided whether or how to proceed.

A spokesman from ANZ Bank of Australia told CNN on Thursday afternoon that its Indonesian partner had no plans to increase its bid for Bank Niaga.

The Asian Wall Street Journal reports that Indonesia has canceled the sale. The newspaper stated Thursday that officials were not happy with the price of the offers.

The bidding has been fraught with difficulty since it began (full story)

Prices too low

"The prices for Bank Niaga are too low, so the disinvestment of Bank Niaga will be delayed," State Owned Enterprises Minister Laksamana Sukardi said, according to the report.

On Thursday, he said the two offers that have come in are low. "Yes, that's right," he said, when asked if they were low final bids, according to Reuters news agency.

Officials put off a meeting later Thursday in Jakarta to discuss the sale. Laksamana Sukardi is the minister in charge of the privatization drive in Indonesia.

The Indonesian Bank Restructuring Agency (IBRA) falls under his purview and is looking to sell 51 percent of Bank Niaga. It now owns 97 percent of the bank.

Official looking to proceed

One senior Indonesian official said that Indonesia is looking to proceed with the sale of a majority stake through other methods. But his authority on the subject is in doubt because he works for the chief economics ministry, not IBRA.

Others view the scrapping of the sale merely as a delay. But failing to hit the sale deadline will likely cause tension with the International Monetary Fund, which laid out a reform schedule with Indonesia as a criterion for its loans to continue.

The IMF says that it is waiting for clarification of the situation before commenting.

Bank Niaga is the second key privatization that the fund is pushing. The IMF last year suspended its billion-dollar loan program to Indonesia due in part to a lack of progress on such reforms.

Indonesia took over the bulk of its banks after they collapsed in the Asian financial crisis.

Second key privatization

Those reforms and the loans had resumed, with Indonesia finally selling a majority stake in Bank Central Asia (BCA), the largest retail bank in the country, this March (full story).

There were repeated delays before that sale came through.

Privatization is a highly political subject in Indonesia, where opponents of the reform drive charge that Indonesia is selling off prized assets below their proper cost.

IBRA sold the majority stake in BCA to a team led by the U.S. hedge fund Farallon Capital Management (full story).

No formal word

On the Bank Niaga bidding, Melbourne-based ANZ says it is advising Panin but does not want to expand under its own brand in Indonesia.

"We've had no formal advice that the sale is off," ANZ spokesman Paul Edwards told CNN on Thursday.

Panin and ANZ are not considering hiking their offer.

"It's not something that we're contemplating at this stage," Edwards said. "We think that the bids that we've made reflect fair value."

The other interested team is led by Malaysia-based Commerce Asset-Holding Berhad. Two bids led by Indonesian teams were rejected.

Stock closed down

Bank Niaga stock is steady at 75 rupiah on the Jakarta Stock Exchange on Thursday afternoon.

Bids for the majority stake closed on Monday, when the stock was trading at 80 rupiah. That values the 51 percent stake at some $360 million, with analysts saying it is in fact worth around one-third of that.

According to unidentified officials cited in the report, both bids came in at around 30 rupiah per share.

Indonesia's stock market has been one of the best performers in the world in 2002, as limited overseas interest returned. The main Jakarta index gained 0.36 percent on Thursday.