[i]Hong Kong Special Administrative Region's Secretary for Financial

Hong Kong Special Administrative Region's Secretary for Financial
Services and the Treasury Frederick S. Ma paid a two-day visit to
Indonesia this week as part of his tour of Southeast Asia to
discuss economic issues and to promote the bond market. He met
with Minister of Finance Boediono, chairman of the Capital Market
Supervisory Board (Bapepam) Herwidayatmo and members of the
business community. The following are excerpts of the interview
he gave on Tuesday to journalists, including The Jakarta Post's
Johannes Simbolon on the results of the visit.

Question: What is the purpose of your visit?
Answer: One of the purposes, other than to get a first-hand view
of the Indonesian economy, is to tell your leaders here, both in
the government and the private sector, about what is going on in
Hong Kong. The economic pillars of Hong Kong, such as logistics,
tourism and financial services, are all performing very well. Of
course, we have the advantage of being part of mainland China.

(With regards financial services sector), about one third of
Hong Kong's stock market 'cap' (capitalization) comes from the
mainland's economy. Our market cap as of the end of March was
number eight in the world. In terms of banking, 70 of the world's
top 100 banks are operating in Hong Kong. We are number one in
funds business management in Asia. We also have almost 100
insurance companies. And the government is pushing for the
development of the bond market in Hong Kong, both in local
currency and dollar currency.

Financial services account for 12 percent of our GDP, whereas
our workforce in the sector is only 5 percent. This is a high
value sector. We are doing very well and we continue to upgrade
our regulatory framework in order to maintain our position as an
international financial center. We believe one area of growth is
private banking, wealth management. We are doing very well in
that area, too. So, (the areas of growth for Hong Kong are) the
bond market and wealth management.

On the bond market, we have just completed the largest
individual securities transaction. The value is HK$6 billion or
almost US$800 million. The government is also contemplating the
issuance of a HK$20 billion government bond.

We would like to see more companies from Indonesia, if they
are interested in raising long-term funds, to use Hong Kong as a
market.

Why should Indonesian firms issue bonds in Hong Kong rather than
in other financial centers?

Actually, Hong Kong has all the infrastructure. We have the rule
of law, as well as legal and regulatory infrastructure. We have
the clearing capacity to do it. We also have the talent. Almost
all of the international banks are in Hong Kong. We feel that
Hong Kong has a tremendous potential to (be the regional bond
center). Already, a lot of bonds are being issued in Hong Kong.
We just want to promote it further. Hong Kong is a very liquid
market.

Indonesia also has a bond market.

I think particularly for local currency, it's important. Because
Asia, in the last financial crisis, exposed its currency
weaknesses. One (problem) is a maturity mismatch. That is why
countries should develop bond markets. You don't want to fund
long-term projects with short-term money. This is what happened
in the past. Using bank loans, you'll face that kind of
situation. If something goes wrong, banks want to get back their
money. Then, it'll expose the corporations to tremendous risks.
So developing the long-term funding is helpful to stabilize the
economy. Another issue is currency mismatch. That, you cannot
address by issuing foreign currency bonds. You can address the
problem by issuing rupiah bonds. That would eliminate currency
mismatch. Companies will use rupiah to pay rupiah. Thus, to issue
local currency bonds is actually a very good idea.

How is the regional bond market developing now?

Compared to the mature markets like the U.S. and Japan, Asian
firms and economies' reliance on bonds is still relatively small.
But, I saw tremendous change from 1995 to the end of last year.
According to my research, Indonesia, in 1995, relied 60.2 percent
on bank loans, 30 percent on the stock market and 1.7 percent on
the bond market. By 2003, bank loans were at 42.9 percent, the
stock market at 51.3 percent. In other words, some of your
financing shifted to the stock market thanks to the buoyancy of
stock market. And Indonesia's (reliance on) the bond market was
5.8 percent (in 2003). Still small, but better. In the U.S., in
1995, the reliance on bank loans was 21.1 percent, stock market
30.4 percent, bond market 48.5 percent. So, the corporate economy
relies heavily on bond markets, not so much on banks. (Compared
to other countries in the region) in 2003, Hong Kong's (reliance
on bond market) is 7 percent, South Korea 30.4 percent, Malaysia
22.4 percent, the Philippines at slightly lower, 4.7 percent,
Singapore is at 20 percent, Taiwan 14.4 percent and Thailand 21.5
percent.