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)