Govt to launch road show next month to market int'l bonds

The Jakarta Post, Jakarta

The government will visit a number of major financial centers including New York, London, Singapore and Dubai next month to assess investors' interest in a planned international bonds issue, said Bank Indonesia Governor Burhanuddin Abdullah.

"In mid-September we will launch a non-deal road show, as a precursor to the international bonds issue," Burhanuddin said on the sidelines of a seminar here.

While the first three cities have long been known as the world's major financial centers, Dubai was also picked because it will host the annual meeting of the International Monetary Fund (IMF), where decision-makers across the world would be present -- including those from the business sector, he explained.

The government, as revealed in its newly proposed draft 2004 state budget, plans to issue international bonds worth US$400 million (Rp 3.48 trillion) next year, as part of foreign financing to help cover an estimated deficit of Rp 24.9 trillion.

The government is in dire need of extra financing sources, as its International Monetary Fund economic bailout program will end later this year. The country would then be ineligible for the debt rescheduling facility from the Paris Club of creditor nations. In the past couple of years, the country was able to save around $3 billion per year through the rescheduling facility.

The funds raised from the issuance of international bonds will be complemented by other options, including fresh loans from the Consultative Group on Indonesia (CGI), privatization of state- owned enterprises, the sale of various assets under the Indonesian Bank Restructuring Agency (IBRA) and the issuance of domestic bonds.

Under the draft 2004 state budget, proceeds from the domestic financing sources will make up the majority of the deficit financing scheme, and is expected to generate Rp 39.8 trillion.

Next year's international bonds issue, if realized, would be the first time the country has issued international bonds since the 1997 financial crisis. Before the crisis, the government issued some $400 million in Yankee bonds.

Analysts have said that global investors, seeking better investment returns amid the declining global interest rate and volatile stock market, would be attracted to the planned bonds issue.

Moreover, the country has gained macroeconomic stability at home, and the stronger rupiah, benign inflation and declining trend in the central bank's benchmark interest rate are expected to further improve Indonesia's sovereign ratings.

In this economic climate, a number of large local firms have successfully issued overseas bonds in order to raise working capital and to repay debts.

2004 Deficit Financing --------------------------------------------------

Projection % of

(Rp trillion) GDP --------------------------------------------------- 1. Domestic financing 39.85 2.0 2. Foreign financing (14.90) (0.7)

a. Gross drawing 29.97 1.5

1. Program loan 6.52 0.3

2. Project loan 19.97 1.0

3. Int'l bonds 3.48 0.2

b. Amortizations (44.89) (2.2)

1. On schedule (44.89) (2.2) ---------------------------------------------------- Total financing 24.92 1.2 ---------------------------------------------------- Source: Ministry of Finance