Photo by Mandiri Sekuritas

JAKARTA (TheInsiderStories) – Indonesia’s largest financial service,  Bank Mandiri Group, has introduced Global IDR Bonds, their newest international capital market investment instrument, to offer an alternative for investors.

The Global IDR Bond is a Rupiah-denominated bond sold in foreign markets, structured similar to the ‘Dim Sum Bond’ issued by the China Development Bank in July 2007.

According to Aloysius Ro, Deputy of Restructuring & Business Development at Indonesia Ministry of State-owned Enterprises (SOEs), President Joko Widodo has approved the issuance plan and suggested they name the instrument ‘Komodo Bond’’, in honor of Indonesia’s famous large species of lizard, the komodo dragon.

The IDR Bond Global offering is expected to increase global investor participation in supporting national development, and is expected to provide access and diversification of Rupiah-based funding sources for companies in Indonesia engaged in various sectors, in particular for infrastructure.

‘This is an alternative fund to boost infrastructure development,’ Aloysius confirmed, on Wednesday (27/9).

The Indonesian government needs a massive pool of funds to invest in the infrastructure sector around US$373 billion, or Rp5,500 trillion over the next five years, broken down into Rp1,100 trillion ($81.3 billion) per year, of which around Rp900 trillion ($61 billion) annual investment needs can be financed by domestic financing, meaning there is a potential of Rp200 trillion per year investment ‘draw’ to be financed from abroad.

Royke Tumilar, a Director of PT Bank Mandiri Tbk (IDX: BMRI) explained how now is an optimal moment for corporations to expand access to international markets, supported by the ‘investment grade’ rating bestowed by an international credit rating agency that now names Indonesia as a proper global investment destination.

Director of Mandiri Sekuritas Silvano Rumantir added, that the IDR Bonds Global instrument is expected to provide access, source and verified Rupiah-based funding for companies in Indonesia engaged in various sectors, particularly the infrastructure sector. And for investors, this instrument provides a diversified portfolio of quality.

In the last 10 years, Mandiri Sekuritas has been entrusted with the completion of more than 470 bond and underwriting transactions totaling Rp108.5 trillion, through the capital markets.

SOEs ministry continue to explore funding alternatives to finance the projects of the SOEs. Previously, Four SOEs like power producer PT Perusahaan Listrik Negara (PLN) has listed Rp4 trillion, toll road operator PT Jasa Marga Tbk (IDX: JSMR) Rp1 trillion also two lenders, PT Bank Tabungan Negara Tbk (IDX: BBTN) Rp 1 trillion and PT Bank Mandiri Tbk (IDX: BMRI) Rp 1 trillion.

According to Minister of SOEs Rini Soemarno, the SOEs will offer asset-backed securities with total amount Rp15 trillion in this year. She said, PLN plan to raise funds with worth Rp10 trillion from the securities instrument.  The SOEs, She added, will use the fund to finance their business expansion to support the government’s development programs.

“For PLN and Jasa Marga Asset-backed securities is based on the long-term revenue while BBTN and BMRI with underlying mortgage credits,” the minister said.

She continued, other way to raise the funds is list the subsidiary of SOEs, divesting part of ownerships of the SOEs projects and other debt instruments. Soemarno added, nine subsidiaries of SOEs ready to go IPO (initial public offering) in the coming years followed President Joko Widodo instruction to utilize capital market to get fresh funds.

IDX Director Samsul Hidayat said the subsidiaries of SOEs who plans IPO in 2017 namely PT Jasa Armada Indonesia, a subsidiary of port operator PT Pelabuhan Indonesia II, PT PP Pengadaan, PT PP Urban and PT PP Energy, unit of of construction firm PT PP Tbk (IDX: PTPP), and PT Wika Realty and PT Wika Gedung, both subsidiaries of construction firm PT Wijaya Karya Tbk (IDX: WIKA).
  
The others, also planning to conduct IPO are GMF, a subsidiary of flag carrier PT Garuda Indonesia Tbk (IDX: GIAA), PT Tugu Pratama Indonesia and PT Patra Jasa, subsidiaries of energy company PT Pertamina and PT Adhi Persada Gedung, a subsidiary of construction PT Adhi Karya Tbk (IDX: ADHI).

Financial Service Agency intends to deepen the market to invite investors into the Indonesian capital market through the issuance of various instruments.

Writing by Elisa Valenta, Email: elisa.valenta@theinsiderstories.com