Indonesia high on investment radar
The investment grade status granted to Indonesia by two global rating agencies, coupled with accelerating economic growth, has prompted global investment banks to look again to Southeast Asia’s largest economy. JP Morgan Chase, the largest bank in the United States, is just one of them.
JPMorgan Chase, whose Indonesian operation was once chaired by Gita Wirjawan, now Indonesia’s trade minister, last month appointed Haryanto Budiman as its managing director and senior country officer for Indonesia. Haryanto’s appointment marks a new landmark in the widening horizons of foreign investment banks in Indonesia.
Haryanto, a long-time banker, will be JPMorgan’s head of global corporate banking for Indonesia. He will report to Gaby Abdelnour, the Asia-Pacific chief executive officer.
Haryanto’s main job will include leading strategic development for JPMorgan’s Indonesian franchise and partnering with local and regional leadership teams to ensure consistent delivery of the bank’s global platform to its clients in the country across all lines of business.
Haryanto, who was a risk management director at Bank Mandiri until January this year, told GlobeAsia recently in an interview that Indonesia had plenty of potential. “The prospect of the economy in Indonesia remains good,” he said.
Moody’s Investors Service raised Indonesia’s sovereign debt rating to investment grade in January, follwing a similar move by Fitch Ratings in December last year. It was a major breakthrough for Indonesia, which lost its investment-level rating in late 1997, when the financial crisis pushed the rupiah through the floor.
At Mandiri, the country’s largest lender by assets, Haryanto, who earned his PhD from the Massachusetts Institute of Technology, led the bank’s strategic initiatives, including non-organic growth activities through acquisition and alliances.
Before joining Bank Mandiri in 2006, he worked for McKinsey & Company in various management consultancy roles across North Asia, Southeast Asia, Australia, New Zealand and the United States.
JPMorgan has to compete with rivals such as UBS AG, Bank of America Merril Lynch, Credit Suisse Group, Barclays Capital and Citigroup, the top-10 banks long operating in Indonesia. They help both the government and private companies in doing business in the country.
One investment banker in Jakarta who declined to be identified said that although the banks are competing to win mandates for corporate and sovereign bonds or intital public offerings and merger and acquisition deals, they are still friends. “So when you say competition, we are not really competing like many people might think,’’ the banker told GlobeAsia. “We are still friends.”
Multi-pronged growth prospects
Gregory L. Guyett, JPMorgan’s global corporate bank CEO, said separately that Indonesia would benefit from a recovery in global trade, thanks to the improving economy in the United States and strong demand from China and India. “China’s economy is bigger than 10 years ago and more of that growth will come from domestic consumption rather than re-export,” Guyett said.
Guyett says Indonesia is becoming the invesment destination for multinational companies from Europe, the US and Japan. “We will help the companies in corporate financing,” adds Haryanto.
Industry analysts note that Indonesia is already the darling of the investment bank business. The government has been selling global bonds in the decade since 2002 to raise funds to plug its budget deficit. The expertise of the investment banks in selling the bonds and market the notes to international investors is an essential part of the recipe.
Last year, when Indonesia raised $2.5 billion in an international bond sale, it hired UBS AG, JPMorgan Chase and Deutsche Bank AG to help arrange the debt. Investment banks typically get between 0.5% and 1% of the total transaction value as their fee.
Sharing similar hopes for a strong future for Indonesia, Rajiv Louis, the head of the Indonesian unit of Swiss banking giant UBS AG, says the situation could in fact improve, even though 2011 was already a record year for the bank.
“We are going to have an even bigger year this year,” said Rajiv. “The interest level from investors from outside Indonesia as well as strategic investors and private equity investors is the highest that we have ever seen.” UBS Securities Indonesia, the Indonesian unit of UBS AG, was involved in 16 transactions in 2011, including corporate lending of almost $500 million.
Sharing the upbeat view, JP Morgan’s Haryanto also expects more business deals in Indonesia this year and ahead, with the international banks ready and able to do their part. GA