Indonesia hails Japan's bond guarantee offer

Indonesia hails Japan's bond guarantee offer

JAKARTA (JP): Minister of Finance Bambang Subianto said on
Tuesday that Indonesia would seize the opportunity offered by
Japan to guarantee its sovereign bond issue.

He said the Japanese offer was an opportunity to raise funds
overseas to accelerate the recovery of the crisis-hit economy.

"But we won't raise more funds than we need," he said on the
sidelines of a seminar on debt restructuring.

This is Bambang's first public statement on the offer by Japan
to guarantee global bonds issued by crisis-hit Asian countries.

The plan was announced by Japanese Finance Minister Kiichi
Miyazawa last week on Malaysia's Langkawi resort island during a
finance ministerial meeting of Asia Pacific Economic Cooperation
(APEC) countries.

Miyazawa said Japan would partially guarantee bonds issued by
Asian governments, in a bid to raise up to 2 trillion yen in
foreign funds to help finance the region's economic recovery.

Japan has long been urged to take a more active role in
efforts to help the region rebuild its shattered economies. The
country has already provided US$30 billion in aid under the so-
called Miyazawa Plan.

Bambang said it was premature to announce details of the
global bond issue.

"We'll soon make the necessary preparations, including the
decision on how much of the funds we need. We really want to use
the offer optimally and productively," he said.

Bambang said the government would have preliminary talks with
its Japanese counterparts as soon as possible.

Indonesia has been badly hit by its worst economic crisis in
three decades. The economy contracted by more than 13 percent in
1998, sending companies into bankruptcy and putting millions of
people out of work.

The country will need multi-billion dollar financing to
rebuild the economy, particularly its banking industry and real
sector. However, Indonesia's low creditworthiness has become a
serious obstacle to raising essential overseas funds.

The International Monetary Fund has organized some $43 billion
in bailout funds partly contributed by multinational lenders,
including the World Bank and the Asian Development Bank, and
bilateral creditors, including Japan and other developed nations.

The government is planning to issue domestic bonds estimated
to reach between Rp 300 trillion and Rp 500 trillion to finance
recapitalization of the banking sector.

Economists and businessmen have said that recapitalizing the
banking sector is not sufficient to kick start lending into the
real sector which remains saddled with massive local and overseas
debts.

The government is still pushing the business sector to reach
debt restructuring agreements with creditors

But chairman of the Indonesian Chamber of Commerce and
Industry Aburizal Bakrie said that restructuring the real sector
was not enough, as ailing industries badly needed a cash input
for working capital.

He urged the government to help establish a reconstruction
bank. He said such an institution could take the form of a joint-
venture bank between a well-recognized international bank and a
local bank to allow it to raise funds overseas through the
issuance of bonds partly guaranteed by the government.

"The proceeds can be used to provide working capital for
viable companies," he said. (rei)