Governance and project quality key to Merah Putih Bond impact

Jakarta (ANTARA) – Economist Yusuf Rendy Manilet from the Center of Reform on Economics (CORE) stated that the governance of Danantara and the quality of projects will determine the success of the Merah Putih Bond. “The success of the Merah Putih Bond ultimately depends on transparent governance of Danantara, the quality of projects that generate credible returns, and the positioning of this instrument as a commercial investment product with clear risk sharing,” Yusuf said when contacted by ANTARA in Jakarta on Wednesday. Yusuf opined that if the yield offered is less competitive, investor interest in the Merah Putih Bond will be limited and participation will depend more on patriotic sentiment than economic considerations. On the other hand, the existence of special legal protections for primary market investors needs to be carefully formulated so as not to create a perception that this instrument reduces standards of transparency, tax compliance, or anti-money laundering supervision. “Such a perception could increase the risk premium and actually hinder the deepening of the financial market,” Yusuf said. The government previously stated that the Merah Putih Bond would not disrupt the government securities (SBN) market because it has a different function. However, according to Yusuf, in practice investors still have portfolio allocation limits, so liquidity competition in the domestic market remains possible. Furthermore, regarding incentives, Yusuf assessed that the government does need to make this instrument attractive without creating obligations for investors. He said the most reasonable incentives are those that still follow market principles, for example tax relief on coupons or capital gains within a certain period, ease of using bonds as collateral, or other limited and measurable facilities. Such incentives are said to be able to increase attractiveness without causing major distortions. “Conversely, if the facilities provided are too broad, the fiscal burden could increase and moral hazard could arise because investors buy bonds only to obtain incentives, not because they believe in the prospects of the projects being financed,” Yusuf said.