Easy cash ends for Indonesia state firms

From toll-road operator PT Jasa Marga to electricity producer PT Perusahaan Listrik Negara, these 118 companies

JAKARTA: Indonesia is shutting off the public funding tap for state-owned companies, pushing them to turn to the markets for capital.

From toll-road operator PT Jasa Marga to electricity producer PT Perusahaan Listrik Negara, these 118 companies – with combined sales of US$133bil – must embrace new sources of fundraising starting next year, State-Owned Enterprises Minister Rini Soemarno said.

Jasa Marga last week sold the country’s first rupiah-denominated global notes, called Komodo bonds, after joining Listrik Negara in offering securities backed by roads and power plants in August.

“We want to let state-owned companies be the pioneers, to do the study and give suggestions to the government on what should be changed” to access new sources of financing capital expenditure, Soemarno said in an interview.

“We do all this so that our capital market becomes better, more liquid and more attractive to investors.”

The state-owned companies have planned 616 trillion rupiah (US$46bil) of capital spending next year to build airports and dams, provide electricity and to ensure uniform fuel prices throughout the archipelago.

The ministry would focus on housing development in 2018, with plans to offer mortgage-backed securities, sell more Komodo bonds, as well as shares in hospital and hotel units to the public and strategic investors, Soemarno said.

“I’m excited about diversification in the market,” Ernawan Rahmat Salimsyah, who manages 7.5 trillion rupiah as chief investment officer at PT Indo Premier Investment Management, said by phone in Jakarta. I see this as being good for both investors, who get more options, and issuers, as they would need to operate and interact at a level of professionalism demanded by investors.”

The capital market in South-East Asia’s largest economy is dwarfed by its neighbours.

The size of Indonesia’s local-currency bond market amounted to US$180bil in September, compared with US$299bil for Malaysia, according to the Asian Development Bank. The stock market capitalisation is about US$482bil, compared with US$507bil for Thailand, an economy that’s half in size.

The Jakarta Composite Index has rallied 13% this year, reaching a record 6,098.779 on Nov 20. The gauge was at 5,980.671 by midday break yesterday.

Shallow local funding pools constrain companies from being able to raise capital without needing to take on the risk of borrowing in foreign currencies, a conundrum that Soemarno bets will be solved once state-owned firms establish a Komodo bond market -- named after the big lizards found in eastern Indonesia. — Bloomberg