Kabinet Merah Putih
A “PLUMP” or overweight cabinet. That’s how some analysts describe the Merah Putih Cabinet. With ministers, deputy ministers, and various public authority around 109 people, they have yet to start their real work, busy as they are with retreats in Hambalang and military-style briefings at the Military Academy in Magelang. Meanwhile, President Prabowo, through his brother Hashim S. Djojohadikusumo, has already shared promising news about writing off bad debts for 6 million debtors.
The business community remains hopeful that, despite the cabinet’s size, it will prioritize sound policies to create jobs, foster quality economic growth, reduce poverty, increase people’s purchasing power, and strengthen food security in Indonesia’s fertile lands. However, to avoid inefficiency, coordination is crucial.
The government’s job is to formulate policies, not just distribute shirts, rice, milk, and books. Public appearances alone don’t solve problems; they must be followed by policies that genuinely improve welfare. The "blusukan" approach as known as unannounced site visits, should end, as it has shown limited results in achieving quality economic growth over the past decade.
Returning to the issue of bad loan write-offs, the government’s plan, announced by Hashim is a positive step. Previously, the law regarded write-offs of non performing loans as a “ghost” haunting state-owned bank executive. Even though Government Regulation (PP) 33/2006 clarified that BUMN (State-Owned Enterprises) loans aren’t classified as state receivables, bankers remained wary.
Reportedly, the government has finalized a PP (government rules) on bad loan write-offs, based on Law No. 4 of 2023 on Financial Sector Strengthening and Development (P2SK). Articles 250 and 251 specify that BUMN bank and non-bank financial institution loans to MSMEs (Micro, Small, and Medium Enterprises) may be written off to facilitate further financing access for MSMEs.
For decades, problematic clauses regarding state losses have been a persistent “ghost,” with the State Audit Agency (BPK) posing a particularly daunting figure due to Law No. 17 of 2003 on State Finances. There’s also Government Regulation in Lieu of Law No. 49 of 1960 on State Receivables, which undermines PP 33/2006. The contradictory articles that treat debt write-offs as state losses – or even corruption – make state bank executives hesitant.
According to Infobank Institute, a policy on write offs for state-owned banks rests on two key principles. First, the number of ultra-micro, micro, and small debtors in “dormant” status grows each year.
Second, clearing these debtors’ accounts can restore their reputations, as they are currently blacklisted in SLIK (Indonesia’s credit information system). With a write-off, these debtors can regain a positive status.
Write-offs are feasible when losses don’t represent state losses or involve f ictitious or fraudulent loans. This can be done as long as actions are taken in good faith, in accordance with legal regulations, corporate bylaws, and sound corporate governance principles. Also, the ceiling for MSME loans eligible for write-offs should be clearly defined.
However, this positive news about bad loan write-offs shouldn’t create incentives for debtors to default deliberately. The global banking model often shows a debtor in default is treated more leniently than a good, punctual payer. Responsible borrowers, who have paid their interest and principal, often feel resentful toward non-payers who receive leniency.
The write-off policy must not encourage a “no-pay” culture among smaller borrowers, such as those from rural banks, online lenders, and multi-finance companies. They should not be trained to avoid repayment. The government must communicate this debt forgiveness policy carefully.
Consider this: responsible debtors rarely receive support, while “dormant” borrowers get write-offs. Let’s not allow this policy to create new moral hazards or undermine the culture of good debtors, who may feel unjustly treated.
The cabinet’s role should be to stay big fat yet healthy, without overstepping into credit decisions for favoured business supporters. A debt write-off policy is a more constructive approach for state banks than “blusukan,” which serves as mere self-personification.
The business community remains hopeful that, despite the cabinet’s size, it will prioritize sound policies to create jobs, foster quality economic growth, reduce poverty, increase people’s purchasing power, and strengthen food security in Indonesia’s fertile lands. However, to avoid inefficiency, coordination is crucial.
