S&P RATING NOT TO AFFECT INVESTMENT IN INDONESIA

By Andi Abdussalam

Jakarta, June 4 (Antara) - The international rating agency Standard and Poor's (S&P) has provided Indonesia with the BB+ rating, a level lower than 'Investment Grade', but the government is convinced it will not disturb investment interest in Indonesia.          Indonesia's economic conditions now are relatively better than those of many advanced countries after the global economic gloom. Moreover, two other international standard rating agencies, Fitch and Moody¿s, have awarded Indonesia with an investment grade level.         The conditions of Indonesia's debt-to-gross domestic product (GDP) ratio and its debt management are far better than those of other emerging nations, and even better than those of countries which have secured the Investment Grade level.         "Frankly speaking, we question the reasons of the S&P (to provide us with BB+ rating). We see that its reasons are the same as those in its previous rating. So, there is nothing new," Finance Minister Bambang Brodjonegoro said in Jakarta Thursday.         The S&P in its latest publication this month did not yet provide Indonesia with the "Investment Grade" level. The agency rated Indonesia's long-term state debentures with the BB+ level and short-term securities with the B level. Prospects in the long-term for Indonesia are positive.         "Amid the global economic conditions where many emerging states have been even downgraded (by the rating agency), we see Indonesia's position given by the S&P as still relatively good. I mean its position is better than those of the emerging nations, even advanced countries," Minister Bambang said.          If the component they used to assess is the debt ratio or the amount of debts, the rating given is questionable because many countries which had secured the Investment Grade rating had higher debt ratio-to-GDP than Indonesia's, the minister said. Their debt deficit is also higher than Indonesia's. "So frankly, I question the S&P rating," the minister said.         However, portfolio investors are not affected by the S&P assessment of the Indonesian investment climate, Bambang said. Investors still positively responded to the government's plan to issue Euro Bonds in the near future.         "It happens, by chance, that we are now launching a Euro Bond roadshow in Europe. Even though the rating was published, the investors in Europe did not care about it. They are of the opinion that the Indonesian state debentures are securities which are equal to the investment grade standard," he said.          Bank Indonesia (BI) which is the Indonesian central bank concurred with the finance minister's opinion, saying the rating will not disturb the interest of investors and creditors in Indonesia.          "Investors and creditors will also look at the Indonesian ratings provided by Fitch and Moody's. They know that the economic ratio position of Indonesia has been improving. So, actually, the rating is not an issue for them," Mirza Adityaswara, the deputy senior governor of BI, said Thursday (June 2).          Fitch and Moody's are two international rating agencies apart from the S&P, which have provided Indonesia with the investment grade levels, respectively in 2011 and 2012.          Although the S&P only provided Indonesia with BB+level for its long-term state debentures and B for its short-term securities, the country's fiscal and economic structural reform framework has been recognized as a positive step which has a measured and positive impact, Mirza said.          Mirza is convinced that Indonesia will have a big chance to secure investment grade BBB- rating from the S&P in the coming six months. The government and BI have also directly shown Indonesia's structural reforms and fiscal improvement framework to S&P officials when they visited the country in May 2016.          Last month, an S&P delegation had met with President Widodo and Coordinating Minister for Economic Affairs Darmin Nasution. The delegation also visited the One-Roof Integrated Service (PTSP) center at the Capital Investment Coordinating Board (BKPM) in Jakarta and reviewed several facilities provided to the investors.          "We have provided them with data. Our economic ratio is improving as against the declining of our current transaction deficit. The external debts of the private sector is also under control. After all that, we can lower our inflation rate to 3.3 percent in 2015," the deputy senior BI governor said.           In its publication received on June 1, the S&P said its main reason to place the Indonesian rating on the BB+ level was that its fiscal instrument performance, or the state budget, has not yet improved, both in terms of on-going cycle and on the structural basis.          In the meantime, like the optimism of the finance minister and the Indonesian central bank, the Capital Investment Coordinating Board (BKPM) said the S&P's rating is an indication of the improvement in the investment climate in Indonesia.           "We praise their decision to give us the BB+ rating. After all, improvement in the investment climate is one of the criteria they used to decide the rating standard. They also judged various other aspects, such as the fiscal framework, government debt, and fiscal burden," BKPM Chief Franky Sibarani said Thursday (June 2).          The rating is an indication of the improving investment climate, he said. The agency had recognized the government's efforts to implement structural reforms, such as subsidy cuts and investment services provided through the One-Roof Integrated Service (PTSP) system, Franky noted in a press statement Thursday.         Indonesia could continue to further improve its rating if its institutional governance, the fiscal policy framework, in particular, could result in better quality government spending, a declining trend of fiscal deficit, moderate government debt, and limited contingent fiscal liabilities, S&P noted in its official statement.          Franky viewed the S&P rating as a constructive input. The government is now determined to ensure the success of the economic reforms issued by President Joko Widodo through a series of its policy packages.         "The president has set up a task force to monitor the implementation of the policy packages, both in Jakarta and the other regions," he noted. The BKPM will continue to optimize the utilization of the PTSP system in the regions.          The Ministry of Home Affairs and other relevant ministries and institutions will implement service standards and simplify the licensing procedures for the PTSPs in the regions. ***3***(A014/INE)EDITED BY INE(T.A014/A/BESSR/F. Assegaf) 04-06-2016 16:25: