Govt called on to open up credit rating industry
Govt called on to open up credit rating industry
JAKARTA (JP): Business analysts called on the government
yesterday to open up the credit rating industry to support the
country's growing market for short-term and long-term debt
securities.
Christianto Wibisono, a noted business analyst, suggested
adding at least one more credit rating agency so that issuers of
debt instruments will have alternatives.
"I think it is high time for the government to consider
opening up the rating industry to both local and foreign rating
firms," he told The Jakarta Post.
Christianto, who is also the director of the PDBI business
data center, acknowledged that the entry of international credit
agencies such as Moody's Investors Service and Standard and
Poor's could hurt the infant PT Pefindo.
"We have to face the reality sooner or later. We have to open
up the industry," he said.
Pefindo -- the only credit rating agency in the country,
established in 1994 -- has been widely criticized for its
inability to meet the demands of companies issuing bonds and
short-term commercial papers.
Debt instruments, both bonds and the short-term commercial
papers, have to be rated by Pefindo before being sold to
investors. The rating requirement, however, often hampers the
issuance of debt instruments as the issuers are forced to wait
for the rating from Pefindo, which is partly owned by Bank
Indonesia, the central bank.
"Issuers of short-term debt instruments such as commercial
papers do not have much time because they have to sell their
papers as quickly as possible," said an analyst who asked to
remain anonymous. "Otherwise, they will not be able to meet their
short-term financial obligations."
He said many issuers often ignore the rating requirements and
sell their unrated short-term notes to meet their immediate need
for short-term funds.
Public protection
A commercial paper analyst, Theo F. Toemion, said that the
sales of unrated commercial papers should be stopped to protect
the investing public.
He said the rating is a must for commercial papers because,
unlike long-term debt instruments, short-term commercial papers
are not secured by their issuers.
Pefindo president, Farid Harianto, added that there is no
justification for not applying for a credit rating.
"It only takes 20 days to rate a commercial paper as long as
the issuers provide all the information needed," he said.
In reality, however, rating often takes more than a month as
many issuers cannot provide all the information required by
Pefindo, Farid said.
He said that many issuers also intentionally defy credit
rating requirements for fear of receiving a low rating grade.
The total value of commercial papers assessed by Pefindo has
so far totaled Rp 6 trillion (US$2.72 billion), with the number
of issuers reaching 45. However, only Rp 4.5 trillion worth have
passed the minimum grade requirement, he said. (hen)