RI stresses continuity to potential investors

RI stresses continuity to potential investors

Dow Jones, Singapore

As Indonesia prepares to sell a global bond next year, an A- list of the country's economic decision-makers stressed to potential investors Monday the country will continue to stabilize economically, even as it graduates from the International Monetary Fund's (IMF) loan program at the end of this year.

The team, including Bank Indonesia Governor Burhanuddin Abdullah, Finance Minister Boedino, Minister of State Owned Enterprises Laksamana Sukardi and a slew of other members of parliament, was in Singapore Monday to meet investors. The roadshow will move on to Hong Kong and Japan later this week.

Interest in the Indonesian sovereign issue at recent roadshows in Dubai, London and New York has already proven strong. The government is now leaning toward a US$600 million issue, larger than the $400 million originally touted.

Indonesia is also preparing to quit the six year-long IMF lending program at the end of the year. It was forced to borrow from the multilateral institution, as well as other bodies and countries, after the Indonesian economy nearly collapsed in 1998, and reliance on the fund has long been a sore topic with Indonesians.

Indonesia will be holding a presidential election next year and there are already some jitters about social instability in the run-up to the July poll.

"Going forward, Indonesia is going to continue to stabilize its economy," Governor Burhanuddin told investors. "Indonesia needs economic stability because there will be no development without stability."

He said Indonesia had seen "robust" economic growth this year - the economy expanded 3.93 percent on year in the third quarter - and he hoped for an expansion of 4.8 percent to 5 percent in 2004. He forecast debt as a percentage of GDP would drop to 55 percent this year and to 47 percent next year.

He added the country would remain committed to a floating exchange rate regime, continue to build up reserves, and pursue reforms in the financial system.

Finance Minister Boedino noted the country had been preparing to exit the IMF lending program for a long time. "There will be continuity of policy in 2004 and beyond," he said.

The government is still seeking a balanced budget by 2006, he said. The 2004 budget, approved by parliament Nov. 10, outlined a budget deficit of 1.2 percent of GDP and the current administration will also have huge input into the 2005 budget.

He forecast a budget deficit of Rp 24.4 trillion year and Rp 9.0 trillion in 2005. Government bond issues, domestically and overseas, are expected to total Rp 32.5 trillion next year, Rp 37.9 trillion in 2005 and Rp 41.0 trillion in 2006, he said.

Meanwhile, State Owned Enterprises Minister Laksamana stressed that while Indonesia has had some difficulties in the past, such as the involvement of the military in politics and poor corporate governance, which deterred investors, that had now changed.

"Indonesia is like a good car from Mercedes or BMW; the battery is flat so we need to jump start the battery, so here we are," he said.

The priority for his department is ongoing privatization of the banking sector and privatization of highly competitive sectors such as hotels and plantations.

He forecast privatization proceeds would exceed Rp 6.4 trillion in 2003, with an estimated Rp 1.5 trillion coming from the sale of Perusahaan Gas Negara.