IDB to help ailing Dirgantara Indonesia

IDB to help ailing Dirgantara Indonesia

Zakki P. Hakim
The Jakarta Post/Jakarta

The Islamic Development Bank (IDB) has made a preliminary
commitment to provide badly needed working capital for the ailing
state-owned airplane maker PT Dirgantara Indonesia (PTDI).

The funds, to be raised through the issuance of Islamic bonds,
is crucial to allow PTDI to fulfill a purchase order from British
Aerospace and Boeing for aircraft components.

An IDB mission from Jeddah head office visited PTDI's factory
in Bandung, West Java, on Saturday.

The plan to provide financial assistance for the aerospace
company was made during a meeting late last month between
Minister of Industry and Trade Rini MS Soewandi and IDB president
Ahmad Mohamed Ali in Saudi Arabia.

IDB representative for Indonesia, Charmeida Tjokrosuwarno,
told The Jakarta Post that the visit was part of a feasibility
study to seek whether or not PTDI was bankable.

Charmeida said that the study and other administrative process
would normally take at least six months, before the eventual
disbursement. The study itself is expected to be finished in
about four months, he added.

"IDB's funds has a nature of fast disbursement, which is
perfect for refinancing," he said.

Should the IDB consider the project as feasible, the bank
would issue Islamic bonds to the international market to raise
the funds. The size of an Islamic bond issue normally ranges from
US$15 million to $60 million, according to Charmeida.

"We have a triple A rating, therefore our bonds are very
prospective," Charmeida said.

PTDI was set up by the government of former president Soeharto
in the 1970s as part of an ambitious project of the then
influential research and technology minister B.J. Habibie to
develop a hi-tech aircraft industry in the country, despite
strong opposition from many economists at the time.

The company, however, has found difficulties in selling its
airplanes, forcing the government to use taxpayers money to help
it stay afloat for around 27 years. But following the late 1990s
financial crisis, the cash-strapped government could no longer
support the ailing airline, and in 2003 the company's management
proposed a layoff for thousands of its employees as part of a
restructuring program to help the company from being totally
bankrupt.

Some analysts have said that PTDI's component manufacturing
unit could still be salvaged as it is considered commercially
viable business as evident from the purchase order made by Boeing
and British Aerospace.

IDB has also received proposals from the Jakarta
administration to help finance a planned monorail project, and
from state-owned toll road operator PT Jasa Marga, Charmeida
said.

IDB has actually received numerous proposals from aspirants
across the country, however, many of them were newly established
firms owned by regional administrations.

"IDB applies a very high requirement in risk management. We
are not commercial bank, but we are also not a social
institution. Therefore, (investment) security really matters to
us," he said.

The bank was established in 1973 by the member countries of
the Organization of the Islamic Conference (OIC), which Indonesia
is a member. It was set up to foster economic development and
social progress in member countries and Muslim communities
worldwide based on the principle of sharia.