Pefindo supports foreign entry

Pefindo supports foreign entry

JAKARTA (JP): Pefindo, Indonesia's only rating agency, does not object to the possible entry of world-class players such as Standard & Poor's and Moody's Investors Services into the country, the company's president, Farid Harianto, said here yesterday.

"It is no problem if Moody's and S & P open their branches here. Our rating results will complement with one another," he said in response to a call for the need of opening up the rating business to foreign players.

Farid said the negative impact of their entry on Pefindo's operations would be minimal, because rating agencies have their own markets and subscribers.

According to existing regulations, both short and long-term debt securities (CPs and bonds) should be rated by Pefindo before being sold to investors.

Farid said that Pefindo, which was established in 1994, is striving to further improve its services in order to match the growing rating demand at home.

"We are negotiating deals of cooperation with a number of world-class rating firms, including S & P, in efforts to improve our rating capability and credibility," he told newsmen following an extra ordinary meeting of the rating firm's shareholders.

Pefindo at present receives technical assistance from IBCA, a British rating agency specializing in the financial sector, and the Rating Agency of Malaysia.

Pefindo has been widely criticized for its inability to meet the growing rating demand from issuers of short-term commercial papers, unsecured debt securities with a maturity of between seven days and four months.

As a result, many issuers trade their short-term commercial papers even without the agency's rating opinions because they could not afford to wait for Pefindo to act. Short-term commercial papers are usually issued to meet issuers' immediate needs for fresh funds.

Farid denied such an allegation, saying that the charge is baseless. "If there were many unrated papers or those with below- standard grades being traded, many banks would have received sanctions from Bank Indonesia," he said.

According to Bank Indonesia's regulations, which became effective in February, all commercial papers traded through banks should have a minimum investment grade of A4.

Farid acknowledged that many issuers of short-term debt instruments rolled over the maturity of their papers before Feb. 1 to escape the rating regulations.

"There are many unrated papers still circulating in the market," he said.

Application

The number of companies applying for Pefindo's ratings has reached 99 since its establishment two years ago, with an average capitalization of Rp 100 billion (US$45.45 million) per issue.

Farid said that of this number, 31 applications are currently being processed.

Yesterday's shareholders' meeting agreed to appoint Kartini Muljadi, a law consultant, Aibar Durin of the Pension Funds of Bank Indonesia, Utomo Yusodirdjo of Artha Investa Argha and Kadirun Y. Landau of the Pension Funds of the state-owned Merpati Nusantara Airline as commissioners of the rating firm.

Binhadi, a former managing director of Bank Indonesia, also retained his job as chief commissioner. (hen)