IFC denies commitment to Indonesia's international bonds

JAKARTA (JP): The International Finance Corporation (IFC), the private-sector arm of the World Bank, has denied that it agreed to guarantee Indonesian sovereign bonds in international markets.

IFC manager and regional representative for Indonesia and Malaysia Amitava Banerjee said here on Monday that IFC could not guarantee sovereign bonds because it would be against the agency's character.

He was referring to Indonesia's Coordinating Minister for the Economy Rizal Ramli's statement issued following a meeting with IFC's executive vice president, Peter Woicke, in Prague on Saturday.

Rizal told The Jakarta Post in a telephone interview following the meeting that the IFC had agreed to guarantee the government's bonds issuance on international markets.

Banerjee said Woicke and Rizal during the meeting discussed the importance of developing secondary bond markets in Indonesia including the issuance of local-currency sovereign paper.

"The meeting did take place ... But what was printed in the local media was incorrect. IFC can't guarantee sovereign bonds because it is against our charter to do so," he told a media conference.

He said during the meeting that Woicke and Rizal also talked about IFC's support for Indonesia's corporate restructuring, economic recovery and IFC's investment program in the country.

Banerjee said IFC, which focuses on providing loans and equity investment to the private sector, could not guarantee a government obligation and instead suggested Indonesia seek assistant from other financial agencies.

He said the IFC could help Indonesia develop a local currency bond market, which it considers important to help establish a benchmark for corporate bonds in the local market.

However, no specific details have been discussed regarding the subject, he said.

IFC has been investing in Indonesia's private sector through loans and equity since 1968. Its combined investment has reached $135 million.

"Typically, we don't provide more than 25 percent of long-term capitalization," Banerjee said, adding that IFC has been involved as a shareholder or lender in about 30 local companies.

He said that due to the crisis some of the companies had difficulty settling the loans.

He said IFC had recently filed bankruptcy charges against an agrifood subsidiary of the Dharmala Group and an overseas financing arm of the Panin Group due to overdue debt repayments.

He said much of the loan repayment process, however, had gone quite well in that IFC had no plans to file bankruptcy lawsuits against other firms.

Banerjee said IFC was committed to continuing its presence in Indonesia, adding that the body had earmarked some $500 million in financial assistance to the Indonesian private sector for the next few years.

"We're currently studying possible projects and expect to spend about $140 million by early next year," he said.

He said IFC was particularly interested in export-oriented companies operating in the manufacturing sector, oil palm plantations and mining, especially coal mining.

The Indonesian government wants IFC to also help in the small and medium enterprise (SME) sector, Banerjee said, adding that IFC would look into that after the World Bank completed its registering and selecting of eligible SMEs. (cst)