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Garuda & Merpati's Fates Now in Hands of Cabinet

Cash Crunch Worsens as Debt Deadlines Loom for Two State Owned Ailrines.

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Following the refusal of Sri Mulyani Indrawati, Indonesia's Finance Minister, to issue to issue a Letter of undertaking that would guarantee Garuda Indonesia and Merpati Nusantara's debt, the fate of the two state-owned airlines now rests with the Presidential Cabinet expected to meet and discuss the matter in the closing days of March.

According to the Indonesian-language Bisnis Indonesia, the decision to leave the matter for the final disposition of the Cabinet was arrived at following a meeting held on Wednesday, March 22, 2006, between the Minister of Finance, the Minister for State-Owned Enterprises Sugiharto, and Commission XI of the Indonesian House of Representatives (DPR).

According to the Chairman of Commission XI, Awal Kusumah, "Commission XI of the House of Representatives have agreed to turn the problem of Garuda and Merpati's rescues to the Minister of Finance and the Minister for State-Owned Enterprises to be discussed and decided in a coming cabinet meeting."

Garuda is in desperate need of short-term funds totaling US$105 million while Merpati is reported to need Rp. 450 billion (approximately US$48.9 million) before the end of March in order to stay in operations.

Members of the House of Representative (DPR) have openly questioned if Sate-Owned Enterprises Minister Sugiharto has the legal authority to issue the undertaking letter that would allow other profitable state-owned enterprises to purchases some of Garuda's debt. Legislators' reluctance to back such a move was further complicated when the Minister of Finance refused to issue the subject letter of undertaking, citing Presidential controls limiting increases in Indonesia's foreign debt.

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