Private foreign debt 'key' to rupiah repair<\/p>\n
JAKARTA (JP): The recovery of the tumbling rupiah will depend
\nlargely on the handling of the country's huge private debts,
\nanalysts say.<\/p>\n
The head of ING Barings' regional economic and debt research
\nunit, Chris Tinker, said yesterday confidence in the rupiah --
\nwhich has lost more than 70 percent of its value since last July
\n-- would be restored once uncertainties surrounding foreign debts
\nin the private sector were resolved.<\/p>\n
"Restoring confidence requires clarification of what is going
\nto be done with the private debts," Tinker said here after
\nattending a conference held by ING Barings.<\/p>\n
Without the clarification the "bear rally will continue", he
\nsaid.<\/p>\n
Indonesia's private offshore debts stand at US$65 billion as
\nof last September, accounting for 55 percent of the country's
\noutstanding foreign debt, according to the official estimate.<\/p>\n
About $9.6 billion of the total amount will mature by March.<\/p>\n
These private offshore debts have been blamed by many as the
\nmain cause of the drastic depreciation of the rupiah against the
\nU.S. dollar and the worsening financial crisis.<\/p>\n
High demand for the U.S. dollar is caused by, among others,
\nprivate companies which need to repay their dollar-denominated
\nloans.<\/p>\n
Tinker said the biggest problem in coping with the currency
\ncrisis was finding an equilibrium where the supply of the dollar
\nmeets the supply of the rupiah.<\/p>\n
Reform<\/p>\n
He said foreign investors also awaited the implementation of
\neconomic reforms agreed by the government and the International
\nMonetary Funds (IMF) last week.<\/p>\n
Another ING Barings economist, Daragh Maher, said yesterday
\nthe IMF reform had restrained a further collapse of the rupiah.<\/p>\n
"The rupiah's downslide is temporary," he said. "Without the
\nreform, I believe the rupiah would go down further."<\/p>\n
ING Barings' chief strategist for Asia, Paul Schulte, said
\nyesterday that Japan's ailing economy also played a big role in
\nthe continuing fall of the rupiah.<\/p>\n
"Japan is facing far bigger problems with their foreign debts,
\nabout five to 10 times larger than the problems in Southeast
\nAsia."<\/p>\n
Schulte said the debt situation in the Indonesian private
\nsector differed from that of South Korea.<\/p>\n
Korean companies got their foreign debts channeled through
\nKorean banks, so that the creditors only had to deal with the
\nbanks, instead of with their debtors, he said.<\/p>\n
"In Indonesia, there are far too many companies that dealt
\nstraight with their foreign creditors."<\/p>\n
This means companies will have to conduct their own
\nnegotiations with the individual creditors, he said.<\/p>\n
ING Barings's two-day conference, which ends today, was
\nattended by representatives of foreign and local investors.<\/p>\n
Executives of Indonesia's leading companies, including the
\nLippo Group, PT Matahari Putra Prima, Gudang Garam and PT
\nTelekomunikasi Indonesia, spoke at the conference and gave a
\ngeneral overview of their companies situation to participants.<\/p>\n
Schulte said many foreign investors had pulled out of the
\nAsian region, as they had lost large amounts of money in the free
\nfall of currencies across the region.<\/p>\n
"Asia is very under-owned in the global market now, most
\nequity investors have pulled out of their investments in Asia."<\/p>\n
The IMF package was an important step toward restoring
\ninvestors' confidence, he said.<\/p>\n
"(On a) regional basis, we're encouraged by last week's
\nannouncement but investment wise we are still cautious over the
\nsituation."<\/p>\n
He said the foreign investors wanted their fair share and a
\nchance to be put on an equal footing with their local
\ncounterparts, including equal protection in court.<\/p>\n
Their foremost criteria to invest in a country were good
\npolicies, he said.<\/p>\n
"The IMF reform was going along that way."<\/p>\n
He said investors were now concerned over solvency parameters
\nmore so than earnings and liquidity for investors wanting to
\ninvest in the country.<\/p>\n
They are interested in companies with good business, future
\npotential and, despite foreign exchange loss, will survive, he
\nsaid. (das)<\/p>",
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