Thu, 11 Feb 2010

From: The Jakarta Globe

By Camelia Pasandaran, Ardian Wibisono & Muhamad Al Azhari
Billionaire investor and philanthropist George Soros praised Indonesia’s economy for successfully weathering the global financial crisis and said the country is now on the global investment radar screen.

Soros is in Indonesia for a two-day visit to review the work of the pro-democracy Tifa Foundation, which he supports.

However, he also found time to pay a visit to Vice President Boediono to get the lowdown on recent economic and financial developments.

Soros said Indonesia had managed to pass through a very difficult financial period and experienced relatively little damage compared to other countries.

When quizzed by local reporters about the Bank Century bailout, Soros said: “Generally speaking, it is appropriate to save the financial system from collapse by supporting institutions that are in trouble.”

However, he criticized the absence of banking regulations globally, saying banks would not have needed bailouts if proper regulations had been in place.

“When you compare the amount of money that was used in Indonesia [for the bailout], compared to the tremendous amount used in the United States and Europe, Indonesia had relatively very little damage,” Soros said.

Some observers have blamed rating agency Standard & Poor’s refusal to lift the country’s sovereign debt rating on rising political tension due to the House of Representatives’ investigation into the Bank Century bailout.

Rahmat Waluyanto, the Finance Ministry’s director general of debt management, dismissed suggestions that the investigation had been a factor.

“S&P’s rating upgrade, I think, is just a matter of time. It is not true they refused to upgrade the rating because of the investigation,” he said.

Rahmat said Finance Ministry officials had recently met officials from S&P, who had been bullish on the prospects for the domestic economy.

“On the growth side, as you know, today [Wednesday] BPS announced a better-than-expected GDP growth figure,” Rahmat said.

Peter Jacobs, the head of foreign-debt analysis and investor relations at Bank Indonesia, also said the Bank Century investigation had not been a major influence on S&P.

“Today [Wednesday] we met with S&P and during the meeting they did not mention anything or ask anything about the Bank Century case or political stability,” he said.

“We mentioned our GDP growth this year. It is good news for us and I’m sure that it is good news to them as well. They will stay for a couple of weeks to see the progress on infrastructure-projects, but overall they are positive about Indonesia. I think they will announce whether they are going to upgrade within the next three weeks,” he said.

Indonesia is still rated “BB-” with a “positive outlook” by S&P, three notches below investment grade.

In late January, Fitch Ratings upgraded Indonesia’s sovereign debt to “BB+” from “BB,” with a “stable outlook,” citing the country’s resilience amid the global financial crisis and good management of the state budget. Fitch’s upgrade means the country is just one step away from its investment grade rating.

Meanwhile, Moody’s Investor Service said in January that the country’s “Ba2” rating remained stable. Moody’s “Ba2” rating means it is two levels below investment grade.