JP/13/Bond

JP/13/Bond

Sulawesi to issue regional bond

Following the revision of the 1999 intergovernmental revenue
sharing law that allows regions to issue debts to raise cash, the
provincial administrations in Sulawesi plan to sell a collective
bond to help finance local development programs.

"We're planning to set up, what we call Celebes Fund. But
we're still waiting for the government (implementing) regulations
on this (bond) policy," Gorontalo Governor Fadel Muhammad said on
Monday.

He said that in the first phase, the region would issue around
US$50 million worth of bonds, with tenure ranging from seven to
15 years and interest rates higher than the market's average.

"It would be better if the funds are later used to build
infrastructure, such as building rice-processing barns or
hotels," Fadel said.

He added that the buyers could be either from foreign or local
investors and that each province would have its share based on
the initial arrangements.

A collective issue, said Fadel, would be much better and
easier compared to an individual issue as investors would prefer
buying bonds of a bigger size than smaller ones.

Besides Sulawesi, the provincial administrations of Riau and
East Java are reportedly also making preparations to issue bonds.

Before issuing bonds, provinces and regencies must first
obtain approval from their respective local councils and the
finance ministry.

Regional bonds are not guaranteed by the central government,
raising fears that possible default will adversely affect the
whole economy. --JP