IFC increases investment in RI, despite volatile business climate<\/p>\n
The International Finance Corporation (IFC) has increased its
\ninvestment in Indonesia for the 2003 fiscal year ending in June,
\ndespite the legal harassment it has suffered here over the past
\ntwo years.<\/p>\n
For the current fiscal year, the investment arm of the World
\nBank has invested about five times more than the US$21 million
\nallocated during the 2002 fiscal year.<\/p>\n
Since 1956, the IFC has invested about $2.3 billion in
\nIndonesia, making the country its sixth largest exposure. The
\nIFC's portfolio in Indonesia covers more than 35 companies.<\/p>\n
The Jakarta Post's Rendi A. Witular interviewed German A.
\nVegarra, IFC country manager for Indonesia, on the group's
\nbusiness interests here and the outlook for the 2004 fiscal year.<\/p>\n
The following is an excerpt of the interview:<\/p>\n
Question: How has the 2003 fiscal year been for IFC in Indonesia?<\/p>\n
Answer: The overall trend in the 2003 fiscal year is slightly
\npositive. In this fiscal year we expect to do $90 million to $100
\nmillion in new business. Our concentration has been on banking,
\nagribusiness, oil services and management training.<\/p>\n
We invested in Bank Buana, participated in the rights issues
\nof PT Astra International and Bank NISP, and we are currently
\nworking in agribusiness and oil service transactions. Those two
\ntransactions should close in June, however we cannot currently
\ndisclose the names of the companies.<\/p>\n
In 2003, we have been very content to see that the
\nmacroeconomy in Indonesia has continued to improve, but we
\ncontinue to be concerned with the poor investment climate,
\nparticularly in the legal sector and the lack of clarity of
\ncontract.<\/p>\n
If Indonesia could do something about this then obviously it
\nwould not only mean more IFC investments, but a lot of other
\ninvestors would come back. There have been some interesting
\nimprovements in the legal system, but not to the level where we
\nwould say we are satisfied.<\/p>\n
Q: What will be IFC's sector of interest during the 2004 fiscal
\nyear?<\/p>\n
A: It is going to be an election year, so we can expect some
\nvolatility in the market. But in general the overall trend is
\npositive. Our emphasis next year will be sort of similar to the
\n2003 fiscal year, which is agribusiness, the financial business
\nand infrastructure. We hope to do at least $100 million in new
\nbusiness in the 2004 fiscal year.<\/p>\n
Q: Why the financial sector and infrastructure?<\/p>\n
A: I think this is the spring time for the (Indonesian) banking
\nsector. We are seeing good trends in terms of nonperforming loans
\nand capital adequacy ratio. So banks are now stronger than they
\nwere two years ago.<\/p>\n
We are obviously always cautious because banks are now
\nstarting to lend. As they start to lend there will be two things:
\npressure on capital in which banks will require stronger capital
\nand also a new mode of lending.<\/p>\n
You know we are in the crisis today because of what happened
\nin the past, so as banks start lending again, particularly to the
\ncorporate sector, we need to bring into banks new ideas in terms
\nof credit risk systems and governance, so the banks can initiate
\nlending to the corporate sector in a better way.<\/p>\n
The financial sector in general is a sector of great
\nattraction for IFC. We want to see a healthy banking sector, so
\nwe will continue to pursue not only investment in this area but
\nalso improvement on the policy side and environment.<\/p>\n
We are also looking at infrastructure development. For the
\nlast five years the investment in infrastructure has come down
\nsignificantly.<\/p>\n
We will continue to seek good investment opportunities with
\nprivate sector operators, I mean with reputable ones, to kick-
\nstart infrastructure sector investment in Indonesia, with
\nparticular attention to the power sector and seaports as areas of
\nimportance.<\/p>\n
We are looking at several concept for ports. Indonesia is a
\ncountry that depends on good logistics to link all the islands.
\nShipping companies also require good port facilities and
\ncompetitive facilities.<\/p>\n
We are looking at option for Jakarta (Tanjung Priok port) ...
\nwhich is in the process of improving operations and expanding
\ncapacity.<\/p>\n
Q: What is your commitment to small and medium enterprises (SMEs)?<\/p>\n
A: We invested in Bank NISP and Bank Buana because we do work
\nwith SMEs and (these banks) do extremely well working with SMEs.
\nWe will continue to support the banks to continue their lending
\nactivities to the SMEs.<\/p>\n
What sustained Indonesia in the post-crisis really was the
\nSMEs; the real crisis was in the big corporate sector. Bank NISP
\nand Buana did well because they lend to the SME sector. That
\nsector has performed better than the corporate sector, but it
\nstill needs lots of support.<\/p>\n
My feeling is that good companies, particularly medium-sized
\nones, have been able to survive the crisis and strengthen their
\ncompetitiveness. They look better and better.<\/p>\n
Q: How is IFC's nonperforming providence in Indonesia?<\/p>\n
A: For Indonesia we still have some providence that are
\nnonperforming and we will work on that in particular. Indonesia
\nhas similar trends to those of any post-crisis country, but in
\nIndonesia it depends on the particular sector. The banking sector
\nis rapidly recovering but the manufacturing sector is still slow
\nto recover. But I would say Indonesia, in terms of nonperforming
\nprovidence, is similar to other post-crisis countries.<\/p>",
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