200 RI firms to tap offshore debt market

200 RI firms to tap offshore debt market

JAKARTA (JP): Approximately 200 Indonesian companies will, for
the first time, raise funds from offshore debt markets this year,
according to Peregrine Fixed Income Limited (PFIL) of Hong Kong.

An analyst at PFIL, Jaideep Krishna, said at the launching of
the company's Asian Credit Research: 1995 in Review here
yesterday that Indonesian companies will enjoy a longer tenure of
debt instrument maturity, more favorable pricing and liquidity
due to improving confidence of international investors.

The Review said that about 250 Indonesian companies and
financial institutions raised foreign currency loans last year,
taking the cumulative total borrowings from offshore markets to
more than US$20 billion as of last year.

"It was a sharp increase as compared to 150 companies in 1994
and about 100 in 1993. It also reflected foreign investors'
improving confidence in Indonesia," said another analyst, Gray.

"PFIL sees Indonesia as a country with great potential. As the
economy grows strongly, PFIL believes that Indonesia cannot only
depend on the loan and equity market, but will soon have to tap
both domestic and international debt markets," Timothy said.

The Review noted the upgrade of investment ratings, the
government's ongoing liberalization measures and a robust growth
of foreign direct investment as the key factors which have
strengthened foreign investor confidence in the Indonesia
economy.

The American credit rating company Standard and Poor's raised
Indonesia's rating from BBB- in 1994 to BBB last year.

The May 1995 deregulation package which cut tariffs on more
than 6,000 items, or about 64 percent of all items, shows the
government's commitment to boost the country's global
competitiveness.

"International competitiveness is one of the criteria that we
used to assess an issuer's capability to service its debt," Gray
said.

"It's worth noting that foreign direct investment is driving
and financing the current account deficit. Therefore the
implications of a weaker currency and larger external debt do not
apply in the case of Indonesia," the Review said.

Jaideep said that PFIL's research team has also estimated a
positive outlook for the Indonesian companies in the sectors of
cement, automobiles, retail and infrastructure; a stable outlook
for plywood, pulp and paper and textiles; and s negative outlook
for the property sector.

He said that cement producers will maintain their strong
earnings growth due to the current undersupply situation.

And an oversupply of apartments and rental offices as well as
high interest rates will cause negative growth for many property
companies.

Pulp and paper companies, according to PFIL, are estimated to
see a decline in profits due to a continuing drop in pulp prices
in the world market.

"But the main advantage for Indonesian pulp and paper
producers is that certain trees used for pulp and paper raw
materials take only five to seven years to grow in Indonesia
compared to about 30 years in other countries," he said.

Moreover, Indonesia's proximity to regional markets which are
net importers of pulp gives a freight advantage of about US$30 to
$50, or about 5 percent of the selling price, per ton.

He added the Indonesian pulp and paper industries also enjoy
low production costs.

"It means that to some extent the price drop may have caused
foreign companies losses but not Indonesian companies. That's why
we anticipate a stable outlook for the sector," he argued.

The Review, which focuses on evaluating the ability of
companies and financial institutions to service their debt
obligation, is divided into two volumes.

The first volume contains reports on Indonesian companies,
including 45 large ones such as PT Astra International, PT Citra
Marga Nusapala Persadha, PT Indah Kiat Pulp and Paper, PT Semen
Cibinong and seven state-owned banks.

The second volume covers Hong Kong, Malaysia and Thailand.

PFIL has been active in the Indonesian fixed income market for
three years, both in the corporate and financial institution
sectors.

It has assisted a number of Indonesian companies in raising
debt financing including PT CMNP, PT Mulialand, Bank
Internasional Indonesia, PT Indah Kiat Pulp and Paper, PT Bank
Negara Indonesia, and PT Bank Ekspor Impor Indonesia. (08)