Indonesia wants to leverage the strong performance of the country's capital markets by boosting direct contributions to the real economy, raise the involvement of listed companies in state projects and increase bond issuance to fund major public developments.
The Indonesia Stock Exchange (ISE) opened the new year much as it closed the old, hitting a 22-month high on January 5, breaking through the 2600-point barrier. The Jakarta Composite Index (JCI) finished 2009 up 87% on the previous year, making the exchange the second-best performer in the Asia-Pacific region, behind only China's Shenzen Bourse.
On January 4, the finance minister, Sri Mulyani Indrawati, said that the government and Indonesia's capital markets had worked well together to mitigate the effects of the global financial crisis and that the stock exchange's positive performance in 2009 had been in part a result of the government's proactive moves to ease the impact of the downturn.
Successful though these joint efforts had been, it was now time to take these further, the minister told a ceremony marking the opening of the trading year at the ISE.
"We will continue to enhance our cooperation with the capital markets, based on mutual trust, and we're committed to growing our industries this year," she said.
At least some of this cooperation will be based on the government's drive to raise funds for developments through bond issues, either directly by the state or by public enterprises. Already in 2010 a number of state-owned or partly privatised businesses have either announced that they are planning to raise funds on the capital markets or are considering this option.
On January 6, Karen Agustiawan, the president of state oil and gas producer PT Pertamina, announced the company was to issue bonds worth $1.5bn this year to fund capital expenditure projects aimed at boosting oil output.
Communications services provider Telkom Indonesia is also eyeing the bonds market, with plans to raise $214m via an issuance to help meet its $2bn capital expenditure commitment for 2010. The country's largest phone company intends to complete the selection process for the underwriters of the bond by the end of January, with the bond itself, which will be denominated in the rupiah, to be launched before the end of the second quarter.
Early in the new year, state controlled lender PT Bank Negara Indonesia announced it was looking to raise as much as $430m through a bond issuance in the first half of 2010, part of measures to increase its capital base and strengthen capacity to meet growing lending requirements as the economy further expanded.
Even further down the track is state-owned electricity company PT Perusahaan Listrik Negara (PLN), which issued a prospectus for two planned bond issues worth a combined $320m late in December. The latest borrowing programme by the utility is a continuation of PLN's active capitalisation of the markets, having raised some $8bn in 2009 to finance large-scale generation and transmission network improvements.
The government itself is planning to use the capital markets to fund its ambitious expenditure programme and bridge its projected $10bn budgetary deficit. In mid-December, the Finance Ministry unveiled its borrowing schedule for this year, factoring in selling up to $18.5bn of debt in 2010, up some 20% on 2009 levels.
According to the ministry, up to 75% of the funds targeted would be raised through the domestic market, a move seen as taking advantage of the high levels of local liquidity and the increasing confidence of lenders.
Quite apart from the increased activity in the bond sector, there are a number of factors that will encourage further optimism in the markets. These include expectations of continued low interest rates and moderate inflation levels for the year, after inflation subsided to 2.78% at the end of 2009 – the lowest in 10 years.
On January 6, the central bank announced it was leaving its key lending rate untouched at 6.5% for the fifth month. Bank Indonesia's governors said they were not concerned about any increase in inflation for the first half of 2010, saying that the interest rate was conducive to economic recovery and higher lending activity by banks.
With the Indonesian economy having posted growth of between 4.5% and 5.5% in 2009, and with better figures predicted for this year and beyond, there is going to be an increased demand for funds, just at a time when the country's liquid capital markets are potentially in their best-ever position to answer the call.