RI has good chance of rating upgraded

RI has good chance of rating upgraded

Urip Hudiono, The Jakarta Post, Jakarta

Indonesia can expect another upgrade in its credit rating on the
back of growing investor confidence in new government's ability
to deliver further political and economic stability, global
rating agency Standard & Poor's (S&P) says.

The government must, however, continue its efforts to improve
the nation's investment climate by fighting corruption in
business, politics and the courts, as any slowing in the reforms
could reverse the favorable sentiment, the agency warned.

"There is a very good chance that Indonesia's current rating
-- with its positive outlook -- will be upgraded," S&P sovereign
and international public finance ratings director for Asia and
the Pacific Takahira Ogawa said on Thursday.

"Statistically speaking, 70 percent of ratings attached with a
positive outlook are eventually raised."

Market investors are in general showing positive sentiment
toward the government's recent moves to ensure economic stability
and steady growth.

"If we look at Indonesia's debt-to-gross domestic product
ratio, then it has improved -- down to 58 percent, the government
said -- while the country's current account surplus is also still
there," Ogawa said.

"The government, furthermore, has repeatedly expressed its
commitment to fight corruption, boost foreign direct investment,
and stick to fiscal discipline."

S&P sovereign ratings group director Lisa M. Schineller,
meanwhile, said that Indonesia, with its diverse economic
resources ranging from agriculture, manufacturing, and oil and
mining, had the potential to grow by 5.5 percent as projected by
the government.

Good fiscal management and declining debt, were the reasons
S&P gave in December when it raised Indonesia's long-term foreign
currency credit rating one step to a B+ from a B and upgraded the
country's long-term rupiah debt rating two levels to BB from a
B+.

Both ratings were credited with a positive outlook.

An S&P "BB" rating means that a country is less vulnerable yet
still faces uncertainties from adverse business and economic
conditions in its capacity to meet financial commitments.

While the two ratings are respectively five and four levels
below a more dependable "A" investment grade, an improved rating
nevertheless reduces a country's investment risks, allowing its
government to borrow funds at cheaper rates.

Ogawa said one of the main obstacles that could frustrate the
government from accomplishing its programs was the existing
ineffective and inefficient bureaucracy.

Another issue was the recent increase of inflation in the
country, which required the central bank quickly apply foreign
currency policies.

"The central bank's policies are very important, as well as
how investors interpret the policies," he said. "If BI is too
slow with its policies, it might affect the country's
macroeconomic foundation."

Bank Indonesia has said it would act more aggressively to
control the volatility of the rupiah and the inflation through
its interest rate instrument, which Ogawa said was sensible
policy.

Commenting on the government's decision to delay its bond
offerings for this month, Ogawa said that it would unlikely
affect Indonesia's rating outlook, as this was mostly caused by
the market's current situation.