Govt may sell Islamic bonds abroad<\/p>\n
Bloomberg, Singapore<\/p>\n
Indonesia may next year sell its first Islamic bonds to global
\ninvestors, Minister of Finance Jusuf Anwar said, to tap Middle
\nEastern demand for investments that comply with the Islamic ban
\non the payment of interest.<\/p>\n
The government may also sell regular, interest-bearing bonds
\nto global investors in what would be the fourth such offering
\nsince the start of last year, Jusuf said in an interview in
\nJakarta on Oct. 7.<\/p>\n
Indonesia has sold $3.5 billion of bonds to global investors
\nin the past two years, more than any other Southeast Asian nation
\napart from the Philippines, because it is able to pay lower
\ninterest rates on U.S. dollar borrowing than on rupiah debt.<\/p>\n
\"Domestic investors are asking for a lot higher yield, which
\nthe government might be loathe to pay,\" said Clifford Lau, a
\nportfolio manager at Paramerica Fixed Income (Asia) Ltd. in
\nSingapore.<\/p>\n
\"I think the volatility of the rupiah might still be there, so
\nthe environment may not be favorable for the government to do
\nlocal-currency bonds.\"<\/p>\n
The world's most populous Muslim nation will be able to spread
\nthe burden of its funding needs by tapping investors in the
\nMiddle East, who are seeking investments that comply with the
\nKoran's ban on interest payments.<\/p>\n
Islamic investments are structured so that investors receive a
\nreturn on their money, for example in fees, that doesn't
\nconstitute the payment of interest.<\/p>\n
\"There's a huge amount of money there in the Middle East and
\nwe realized we haven't tapped any single cent,\" Jusuf said in an
\ninterview in Jakarta on Oct. 7.<\/p>\n
\"That's not good.\"<\/p>\n
Indonesia is raising funds to help cover its budget deficit.
\nThe government has enough money to repay international investors
\nbecause it is on track to wipe out the deficit by 2009, the
\nminister said.<\/p>\n
The government plans to lower the ratio of its debt to gross
\ndomestic product to 42 percent next year, from 100 percent a few
\nyears ago, Finance Minister Anwar said.<\/p>\n
Indonesia's total debt, including loans from multilateral
\nagencies, is $130 billion, of which about half is dollar debt,
\nAnwar said. The government's budget for next year will set aside
\nfunds for the payment of $400 million of bonds that come due in
\nAugust 2006, Anwar said.<\/p>\n
The government plans to borrow as much as Rp 30.5 trillion
\n($3.04 billion) from overseas, including from bond investors,
\nnext year to help cover its budget deficit, which it estimates
\nwill narrow to 0.7 percent of gross domestic product in 2006.<\/p>\n
In the six Arab monarchies that surround the gulf, oil
\nearnings will increase 25 percent to $250 billion this year,
\naccording to Standard Chartered Plc. Crude oil for October
\ndelivery reached a record $70.85 a barrel on Aug. 30 on the New
\nYork Mercantile Exchange.<\/p>\n
To comply with Shariah, the Muslim religious law, Islamic
\nbonds typically are secured by assets such as real estate, and
\ninvestors are paid from rental income. At maturity, the assets
\nare sold to pay the principal.<\/p>\n
The government is still studying the assets that could back
\nsuch a sale, Jusuf said. The government has agreements with
\nmultilateral and bilateral lenders guaranteeing it won't pledge
\nsome of its assets if that pledge will reduce the lenders'
\nsecurity.<\/p>",
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