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)