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Deciphering BUMN Karya’s Debt Quandary

BUMN Karya, a state-owned construction company in Indonesia, has garnered significant attention in the recent period. According to the Indonesian parliament (DPR), the country's overall debt has attained an astounding Rp20 trillion as the primary cause mainly ascribed to the outstanding debts of state-owned enterprises (BUMN) and the remuneration of civil servants. Collaborative programs among state-owned enterprises have contributed to the accumulation of debt within the Himbara group, reaching Rp70 trillion. This debt quandary has implications for various stakeholders, particularly banks with significant exposure to BUMN Karya's substantial debts. Nevertheless, the Financial Services Authority (OJK) has expressed concerns regarding the credit risks associated with BUMN Karya's escalating debt. The CEO of Bank Rakyat Indonesia (BRI), one of the major banks involved, has acknowledged the issue of BUMN Karya's debt and publicly addressed it, assuring that it will not impact the bank's net profit while also emphasizing the importance of implementing proactive measures to mitigate associated risks. Triggering discussions and raising alarms about the country's debt levels and potential risks to the financial sector, the debt anguish involving BUMN Karya highlights the need for close monitoring and appropriate actions. Given the substantial scale of the country's debt and the involvement of Regional Development Banks (BPD) in the financing, decisive measures are needed to ensure financial stability and mitigate risks for both BUMN and BPD.

The Regional Development Banks (BPD) gained attention from BUMN Karya’s pressure in redeeming the debts. BPD’s contributions in funding BUMN Karya have not been a surprise due to their frequent direct and syndicated loans towards the company. As the tension from the government arises, handing out major loans to BUMN might not seem like the brightest idea considering the doubtful returns. BUMN and PT Waskita Karya Tbk have accumulated debt to 24 regional development banks across Indonesia, with Waskita Karya gathering a total of Rp5 trillion in the first quarter of 2023. The loans consist of short-term and long-term loans while distributing their assets to multiple BUMN Karya companies. PT Bank Jawa Barat’s loan notably has the largest funding in BUMN Karya, reaching Rp1,44 trillion scattered throughout their parent and sister companies. The President Director of PT Bank Pembangunan Daerah Jawa Barat, Yuddy Renaldi, has stepped out to address the funding by asserting that the loan towards BUMN is far from the major investment in their portfolio. Details about the loans were then revealed to be included in the management of the corporate segment with a portfolio of Rp16,5 trillion. This figure has experienced growth until March 2023 of around 14.7% YoY with Non Performing Loan in the range of 1.4%. Following the possibility of default coming to the surface, The Director of PT BPD Sumatera, Antonius Prabowo Argo, eases concerns by assuring to supervise the funds strictly to avoid unfortunate events. Even though optimism from the BPD remains high, BUMN Karya’s obligation to fulfill its debt is still pending.

Building upon the aforementioned observations, a closer examination of the debt held by state-owned enterprises (BUMN), particularly in the banking sector, sheds light on the significant financial burden they face. This has prompted the Financial Services Authority (OJK) to closely monitor the developments within the SOEs, especially considering that their credit exposure is predominantly linked to state-owned banks in the State-Owned Banks Association (Himbara), rather than private banks. Notably, the debt accumulated by BUMN Karya in Himbara alone amounts to Rp70 trillion, with PT Bank Negara Indonesia (BNI) restructuring its debt under a master restructuring agreement (MRA) valued at Rp7,51 trillion. Additional SOEs like PT PP, Waskita, and others also bear substantial outstanding obligations. To address these financial challenges, the CEO of PT Bank Rakyat Indonesia (BBRI), Sunarso, assures stakeholders that the company has implemented robust reserve strategies and boasts a high non-performing loan (NPL) coverage of 282.49% in the first quarter of 2023. Sunarso emphasizes the establishment of proper provisions tailored to the collectability of BUMN Karya's debts, ensuring sufficient reserves regardless of their collectability status. Despite the significant exposure to BUMN Karya, Sunarso asserts that BBRI maintains a positive book position by employing a modified loss system that accounts for potential losses. Minister of State-Owned Enterprises, Erick Thohir, highlights the magnitude of BUMN Karya's debt and the presence of restructuring agreements across multiple banks. In response, the OJK will closely monitor the risk management practices of these banks, emphasizing the importance of proper credit processes and adequate provisioning based on debtor conditions.

Sources :

CNBC Indonesia

CNN Indonesia


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