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.