IFC agrees to guarantee Indonesia's int'l bonds

IFC agrees to guarantee Indonesia's int'l bonds

JAKARTA (JP): The International Finance Corporation (IFC) has
agreed to guarantee the government's bonds issuance in the
international market, according to Coordinating Minister for the
Economy Rizal Ramli.

Rizal said an "initial agreement" was reached during a meeting
in Prague, Czechoslovakia, on Friday with IFC president Peter L.
Woicke.

"But regarding the size and when to issue the bonds, that has
not yet been decided," he said. "The IFC guarantee will help
lower our cost of funds (when issuing the bonds)," he told The
Jakarta Post in a telephone interview.

Rizal, Minister of Finance Prijadi Praptosuhardjo and acting
governor of Bank Indonesia Anwar Nasution are in Prague to lobby
international donors to maintain their support for the country.

Indonesia is currently facing heavy international criticism,
particularly due to the recent killing of United Nations
humanitarian workers by pro-Indonesia East Timor militiamen in
Attambua, West Timor.

The international donors are currently gathering in Prague for
the annual meeting of the International Monetary Fund and the
World Bank.

Bank Indonesia issued its international bonds for the last
time in 1996 in a bid to set a benchmark for the Indonesian bonds
floated overseas.

The bonds listed on the New York Stock Exchange are worth
US$300 million and will mature in 2006.

Bond offerings made by local private companies overseas were
generally more expensive at the time than those floated by other
countries, due to the absence of government bonds.

By floating the government bonds, Indonesian bond issuers
would have a benchmark or a guideline in setting up terms and
conditions of their bonds.

If the current government realizes plans for the new
international bond issue, it would be the first since the country
was hit by the financial crisis in the middle of 1997.

Trade facility

Elsewhere, Rizal said that the IFC, the investment arm of the
World Bank, had agreed to provide some $500 million in a trade
facility loan to help the country boost its exports and utilize
the 40 percent excess capacity in the domestic manufacturing
sector.

"A team from the IFC will visit Jakarta soon to work out the
details," he said.

He said that the trade facility loan would be channeled via
state Bank Mandiri and other commercial banks.

Meanwhile, the Antara news agency quoted IFC's Woicke as
saying that Indonesia's strong commitment to continue its
economic reform program had encouraged the investment firm to
provide its support for the country to recover from the economic
crisis.

"We will lend our support to Indonesia, so that it can recover
from the economic crisis as quickly as possible," Woicke said.

The IFC also expressed commitment to help Indonesia develop a
credit assessment agency with a function of helping minimize and
assess risks in bank lending.

Woicke said that the IFC had extensive experience in
developing such an agency in several countries.

"I hope the same success can be applied to Indonesia," he
added.

The representative office of the agency in Jakarta said that
the IFC, which made its first investment in Indonesia in 1971,
had since booked $2.1 billion in cumulative commitments to the
country.

Earlier, on Thursday, Rizal also reached an agreement with
World Bank president James Wolfensohn for the bank to provide a
$1.2 billion long-term soft loan to the country through the
International Development Association (IDA) scheme.

Rizal said that the loan was only meant for low-income people,
including the financing of infrastructure development in rural
areas, development of small- and medium-scale businesses and the
antipoverty program.

"The disbursement of the loan will be in three years," Rizal
said. (rei/bkm)