Accuracy of statistics on RI's recovery

Accuracy of statistics on RI's recovery

Tata Huberta, Economist, Washington

Over the last few days, newspapers have been filled with
quarterly financial statements by a number of Indonesian
corporations.

Astra International, the Indonesian bellwether company, posted
a handsome profit in the first quarter of this year, amounting to
Rp 1.1 trillion, or double the profit of the same period the
previous year.

Similarly, Indofood also recorded a nice profit in the first
quarter of this year, an increase of 41 percent to Rp 308.6
billion.

In fact, had it not been for changes in the Indonesian
Accounting Standard, the profit would have been 102 percent
higher than last year.

Telkom, the Indonesian telecommunications giant, reported a
profit of Rp 1.5 trillion in the first quarter, a sharp
improvement from last year. Bank BCA, whose ownership changed
hands this year, also reported a jump on its profit to Rp 832.7
billion in the first quarter.

All of this good news is expected to continue in the coming
days, with an endless number of companies reporting substantial
increases in their profits.

These signs of a rebound for the Indonesian corporates has
consequences for the Indonesian economy, and the accuracy of the
recent report by the Central Bureau of Statistics (BPS).

The last four years have witnessed the complex process of the
restructuring of the Indonesian corporates.

A number of big companies, with hundreds of creditors, finally
concluded the lengthy process of their restructuring deals.

In some cases, the former owners of these companies agreed to
swap some of their shares for the debt they owed.

The most famous example of this was the restructuring deal
struck by the Bakrie Group, in which the Bakrie family agreed to
limit its ownership to just five percent in their companies.

This sacrifice seems to have finally paid off. Before the
restructuring was completed, these companies were not able to
post a profit. Rather, their interest rate burden put them deeper
into the red. Having completed the restructuring process, these
companies are no longer burdened by huge debts.

The success stories of the restructured companies has also
affected their standing in the eyes of international creditors.

A number of financing deals have been completed in the past
few months. Medco, a restructured company active in oil and gas
exploration, has just been approached by a syndicate of Japanese
banks offering the company another financing deal with
competitive terms.

The terms could beat what was achieved by the company in its
last debt offering.

Similarly, a number of companies have been able to get an
international rating several notches above the sovereign rating.

These facts indicate the new reality for the companies that
have completed their restructuring efforts; they have been reborn
into new, much sounder, and hopefully wiser companies.

Since there are still many companies whose restructuring deals
are in the pipeline, as well as companies that are unwilling to
move quicker to restructure, the lessons learned from the success
of these restructured companies may serve as an eye-opener.

The success of the restructured companies could become a good
incentive for other companies to expedite their restructuring. In
fact, with the rebounding market, there are more reasons for
these companies to arrive at better deals in the restructuring
process.

As is usually predicted, the rebound of the Indonesian
corporates should come hand in hand with the rebound of the
Indonesian economy.

In the recently submitted budget draft, the assumptions used
for the upcoming fiscal year are even brighter. The growth rate
of the Indonesian economy is predicted to be between four percent
and six percent. This prediction is widely shared by the IMF,
since there is a sufficient basis for such a high estimate. This
budget submission, and hence the presentation of the basic
assumptions, was made just a few days after the BPS presented its
report on the national economy.

Therefore, the not so rosy picture of the first quarter of
this year by the BPS might deter Minister of Finance Boediono,
and lead him to change the basic assumptions.

But with the various reports of companies' earnings published
in the last few days, the finance minister's optimism seems to be
vindicated. The companies' earnings are even rosier than the
economic forecast.

As we learned from the numbers reported by the BPS, the gross
domestic products for the first quarter amounted to Rp 412.2
trillion. The combined profits of the few companies cited here,
Astra International, Indofood, Bank BCA and Telkom, are more than
Rp 4 trillion. In addition, they also paid wages, interest and
other income factors. Therefore, the added values of these
companies may easily reach more than Rp 10 trillion.

Therefore, their contributions to GDP are certainly not
negligible. The fact that they experienced a sharp increase in
sales and profit in the first quarter of this year indicates that
their contributions to GDP also experienced a very high growth
rate. BPS stated that aside from the agriculture sector, which
experienced a growth rate of 16.51 percent, other sectors only
grew less than 2 percent.

While it may be argued whether the performance of the four
companies can represent their sectors, the fact of the matter is
that these companies, which have a reasonable share of GDP, were
able to record very high growth in their sales and profits, and
consequently their contribution to GDP. Therefore, to have only
less than 2 percent growth in their sectors, the other companies
in their sectors would have to perform very poorly, with negative
or at least only small growth.

This argument leads me to a recent experience with statistics
in the U.S. Earlier this year, the U.S. Department of Commerce
indicated that the growth rate of the GDP in the last quarter of
2001, even though in positive territory, was very low. However,
this positive growth cheered the market. A few weeks later, the
first revision by the Department brought the growth rate to
almost 1 percent. The smiles were certainly broader. In fact, the
final revision brought the number up further to 1.7 percent, a
very high level of growth. The cheer certainly changed to
euphoria.

Time will tell whether the BPS will learn from the U.S.
experience and revise its numbers, or whether it will continue to
believe that its numbers are the correct ones.