Camelia Pasandaran, Ardian Wibisono & Muhamad Al Azhari
Vice President Boediono, left, and billionaire investor and philanthropist George Soros at Boediono’s office on Wednesday. (Antara Photo)
Indonesia Now On the Global Investment Map, Soros Says
Billionaire investor and philanthropist George Soros praised Indonesia’s economy for successfully weathering the global financial crisis and said the country is now on the global investment radar screen.
Soros is in Indonesia for a two-day visit to review the work of the pro-democracy Tifa Foundation, which he supports.
However, he also found time to pay a visit to Vice President Boediono to get the lowdown on recent economic and financial developments.
Soros said Indonesia had managed to pass through a very difficult financial period and experienced relatively little damage compared to other countries.
When quizzed by local reporters about the Bank Century bailout, Soros said: “Generally speaking, it is appropriate to save the financial system from collapse by supporting institutions that are in trouble.”
However, he criticized the absence of banking regulations globally, saying banks would not have needed bailouts if proper regulations had been in place.
“When you compare the amount of money that was used in Indonesia [for the bailout], compared to the tremendous amount used in the United States and Europe, Indonesia had relatively very little damage,” Soros said.
Some observers have blamed rating agency Standard & Poor’s refusal to lift the country’s sovereign debt rating on rising political tension due to the House of Representatives’ investigation into the Bank Century bailout.
Rahmat Waluyanto, the Finance Ministry’s director general of debt management, dismissed suggestions that the investigation had been a factor.
“S&P’s rating upgrade, I think, is just a matter of time. It is not true they refused to upgrade the rating because of the investigation,” he said.
Rahmat said Finance Ministry officials had recently met officials from S&P, who had been bullish on the prospects for the domestic economy.
“On the growth side, as you know, today [Wednesday] BPS announced a better-than-expected GDP growth figure,” Rahmat said.
Peter Jacobs, the head of foreign-debt analysis and investor relations at Bank Indonesia, also said the Bank Century investigation had not been a major influence on S&P.
“Today [Wednesday] we met with S&P and during the meeting they did not mention anything or ask anything about the Bank Century case or political stability,” he said.
“We mentioned our GDP growth this year. It is good news for us and I’m sure that it is good news to them as well. They will stay for a couple of weeks to see the progress on infrastructure-projects, but overall they are positive about Indonesia. I think they will announce whether they are going to upgrade within the next three weeks,” he said.
Indonesia is still rated “BB-” with a “positive outlook” by S&P, three notches below investment grade.
In late January, Fitch Ratings upgraded Indonesia’s sovereign debt to “BB+” from “BB,” with a “stable outlook,” citing the country’s resilience amid the global financial crisis and good management of the state budget. Fitch’s upgrade means the country is just one step away from its investment grade rating.
Meanwhile, Moody’s Investor Service said in January that the country’s “Ba2” rating remained stable. Moody’s “Ba2” rating means it is two levels below investment grade.
Related articles
Investment in Indonesia Increases: Government
4:23 PM 26/07/2010
Foreign Investment 'Vital to GDP Growth'
9:48 PM 02/03/2010
Interest in Projects Signals Success of Indonesia’s PPP Push
10:06 PM 18/04/2010
Total Direct Investment in Indonesia Up 10% in First Quarter
8:37 PM 06/04/2010
$1b Qatari Investment Fund Nears Realization
9:37 PM 02/03/2010
Reignmaker
7:08 AM February 11, 2010Bureaucracy Slows Indonesia Oil & Gas Development
As the country's resources flag, an ill-considered government move puts a roadblock in the way
Indonesian oil and gas development is expected to stall in 2010, with state revenue from the sector falling US$6.36 billion, down 25 percent on 2009, and direct investment falling to $12.18 billion from $13.77 targeted, down from $13.52 billion in 2008, with the blame squarely at the government's door.
Waryono Karno, secretary-general at the Indonesian Energy and Mineral Resources Ministry, told reporters on Jan. 4 that the failure to find new investors for most of the 40 oil and gas blocks offered government in 2008 was the major factor.
Investors usually pay signing bonuses to government when development contracts are agreed and can later make cost recovery payments for allowable items under the provisions of oil and gas production sharing contracts (PSCs). But amidst unfavorable global conditions, Indonesian parliamentarians and the government made a mistake in pushing the PSC system into the regulatory framework of the state budget. The result was that government put a state budget cap on cost recovery. The law on the state budget capped the total cost recovery for the industry at US$12 billion for 2010, up from US$11.05 billion in 2009.
For oil and gas developers facing a multiplicity of risks from unstable geology to the erratic behavior of Indonesian local governments, an upstream regulator alleged by parliament to be falling down on the job, lack of positive sentiment or technical capacity from the national bureaucracy, plus a moody parliament, the cap fit he who wore it, conveying anything but a welcome door wide open to investors.
Imposing the cap was a very odd thing to do for a government facing an energy crisis (and power cuts) which knows that its oil lifting capacity is falling like an injured bird and facing a gas shortage both for LNG exports and a gas-starved downstream industry.
Not surprisingly newly installed Coordinating Economic Minister Hatta Rajasa promptly concluded on Jan. 5 that, "The policy of capping cost recovery is not appropriate. This is not supposed to be capped. We will fix this matter."
However, as Suwito Anggoro, president director of PT Chevron Pacific recently hinted, this might not be the end of the story. "If Indonesia's oil and gas industry is a restaurant, maybe this is the right time to offer menus other than the PSC," he said.
»
D.G. -
Very well written piece.
The general malaise of our upstream industry is the result of countless specific transgressions against the foreign investor.
General policy, as you state, is one issue. Implementation is another.
Imagine drilling 2 wells to success flow completion and never being paid for drilling services.
Balance 3 wells of contract cancelled as maneuver to avoid paying on the first two.
‘Thanks, our brother-in-law drilling contractor can take it from here’.
Or another instance, a simple matter of compensation for LIH.(lost in hole)
Three panels of three judges perplexed by such a fundamental concept as curing a loss legally documented and never contested in fact.
Strictly covenant in contract BANI arbitration? So what - any judge can be paid to ‘waive’ arbitration agreed to between parties.
I will never again enter into a contract unless a Head of Agreement is signed in Singapore assuring that the terms of contract will be adhered to.
Sanctity in Contract is the short commodity in Indonesia. The foreign investor is just teh culup.
Bpk Adnan Buyung Nasution is our champion czar against corruption.
hmmmm….
The game changer in Indonesia will be when the powers that be stop changing the game.