Govt has to bail out private debt: Analysts<\/p>\n
JAKARTA (JP): The Indonesian government has to bail out the
\ncountry's corporate foreign debt in a bid to ease the country's
\ncurrency crisis, economists and analysts say.<\/p>\n
Raden Pardede, an economist with state-owned PT Danareksa
\nSecurities, said yesterday that bailing out the private sector
\nwas a must in coping with uncertainty in the rupiah's value.<\/p>\n
\"Like it or not, the government will have to make a bailout,\"
\nsaid Raden. \"The impact (of the debt crisis) on the economy is
\nexponential, not linear.\"<\/p>\n
He said the rescue should have come months ago, \"but it's
\nbetter late than being sorry\".<\/p>\n
His remark follows last week's statement by chairman of the
\nIndonesian Chamber of Commerce and Industry Aburizal Bakrie that
\nthe private sector's overseas debt was virtually impossible to
\npay off given the continued fall of the rupiah's value.<\/p>\n
\"There should be a debt rollover,\" Aburizal said, adding that
\nthe private sector needed between 2 and 3 years' time to pay its
\ndebt.<\/p>\n
Laksono Widodo, an analyst with PT ING Baring Securities
\nIndonesia, also suggested active government intervention.<\/p>\n
\"With the current exchange rate, the private sector foreign
\ndebt has increased fivefold.\" Indonesia's foreign corporate debt
\nis believed to be at least US$65 billion.<\/p>\n
The rupiah closed at 12,250 to the U.S. dollar yesterday,
\nrepresenting a 80 percent drop in value from 2,400 since July.<\/p>\n
Analysts said Bakrie's statement was a signal to foreign
\ncreditors that the private sector needed more time to repay its
\ndebt or opt for a debt moratorium.<\/p>\n
An analyst said he believed the government would soon have to
\nbail out some corporate debt to prevent a debt moratorium which
\nwould drive the economy into the ground.<\/p>\n
Danareksa's Raden said the government must begin the bailout
\nsoon or the crisis could become worse. He said that since it was
\nthe government who made the policies, it should also be the
\ngovernment who solved the crisis.<\/p>\n
He said the country's largest creditors were from Japan,
\nGermany, France and the U.S.<\/p>\n
He said there were many models for the government to follow in
\ndealing with the private sector debt, including transforming the
\nprivate debt into government bonds. \"The important thing is that
\nthere should be political willingness to do so.\"<\/p>\n
He said there should also be a mechanism for the government
\nbailouts to prevent a \"moral hazard\". One example of this would
\nbe to ask the owners of companies to put up their private wealth
\nas collateral.<\/p>\n
The Indonesian government has stated that it will not bail out
\nprivate companies' foreign debt, which has caused some analysts
\nto predict a debt moratorium.<\/p>\n
A Goldman Sachs economist said the country was unlikely to
\nimpose a debt moratorium, pointing out that Jakarta could come up
\nwith a subsidized exchange rate for companies to help them cope
\nwith their foreign debt repayments.<\/p>\n
Some have opposed such a government bailout. I Nyoman Moena, a
\nsenior banker, is one. \"The chance for a bailout is small,\" he
\nsaid.<\/p>\n
He said the true amount of corporate debt had never been made
\nclear. \"They have been asked to be transparent about their debts,
\nbut disregard the request. So why should we bail them out?\" he
\nasked.<\/p>\n
Let there be a debt moratorium with its consequences, he said,
\nso the country could get it over with. \"At least then we would
\nknow where we're standing.\"<\/p>\n
There have been many proposals for the government's
\nintervention in the debt crisis. The latest include a Morgan
\nStanley proposal of a $10 billion sovereign bond deal.<\/p>\n
Another was the Asia Pacific Economic Cooperation (APEC)
\nforum's recommendation that countries in the grouping which faced
\neconomic difficulties to raise funds by issuing bonds which in
\nturn would be guaranteed by wealthier members. Indonesia is a
\nmember of APEC.<\/p>\n
In Japan, which is Indonesia's largest creditor and aid donor,
\nVice Finance Minister for International Affairs Eisuke Sakakibara
\nsaid Sunday that Tokyo and the International Monetary Fund had
\nplanned \"some sort of measure\" this week on Indonesia's financial
\ncrisis. (08)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-has-to-bail-out-private-debt-analysts-1447893297",
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