Corporate foreign debt 'manageable', says minister

JAKARTA (JP): Coordinating Minister for the Economy Rizal Ramli said on Friday that the country's corporate overseas debt maturing in 2001 would not be a serious threat to the rupiah as the debt would still be "manageable."

Rizal pointed out that the success of the Jakarta Initiative Task Force (JITF) last year in helping restructure between US$8 billion and $10 billion in corporate foreign debt has eased the debt burden.

"I think it (the debt level) will be much more manageable," he told reporters following a meeting with legislators.

Bank Indonesia has said that some $16.6 billion in corporate overseas debt would mature in 2001.

The central bank said that another $2.3 billion owed by the banking sector to foreign creditors would also mature in the same year.

Rizal said JITF was expected to help restructure more foreign debt.

He did not mention JITF's new target, but according to the previous government letter of intent with the International Monetary Fund, the task force is expected to help restructure a total of $12 billion in corporate debt by April 2001.

The rupiah had been under strong pressure last year due to a combination of domestic political instability and external factors.

But experts also said that many corporations had purchased U.S.dollars to repay their foreign debt.

The rupiah dropped to as low as 9,700 per U.S. dollar late last year, which was more than 27 percent lower than the level in early last year.

The average exchange rate last year was Rp 8,400 per U.S. dollar. The government's exchange rate target is Rp 7,000 per U.S. dollar.

Economists have said that restructuring the country's huge corporate foreign debt would be critical to the economic recovery process.

The corporate sector owes a total of around $65 billion in corporate foreign debt to foreign creditors.

In a recent report, Bank Indonesia also said that the corporate overseas debt in 2001 would decline following progress in its restructuring.

Bank Indonesia deputy governor Miranda Goeltom said the maturing corporate overseas debt would not create a strong pressure on the rupiah because much of the debt was owed to parent companies abroad.

"The pressure on the rupiah would likely be the result of domestic political uncertainties," she added.

Rizal also said the expected strong export performance this year as well as the return of foreign investors to the country should bode well for the rupiah.

He said the sale of assets controlled by the Indonesian Bank Restructuring Agency (IBRA) would encourage foreign investors to return.

The government is planning to sell its ownership in the publicly listed Bank Central Asia and Bank Niaga in June this year. This is one of the asset sales awaited for by foreign investors.

The government is also planning to privatize around eight companies this year to raise around Rp 6.5 trillion (US$684.21 million) in proceeds.

State-owned pharmaceutical company PT Indofarma is expected to go into the market first through an initial public offering in the first quarter of this year. (rei)