Finance Minister Sri Mulyani Indrawati and Governor of Bank Indonesia Perry Warjiyo in One Seminar in Jakarta - Photo: Special

JAKARTA (TheInsiderStories) – Good morning! Indonesian government to issue Global Wakalah SUKUK also known Green SUKUK with total amount US$2 billion, according to official statement on Thursday (02/14).

The Global SUKUK will be issued respectively $750 million with return 3.9 percent annually in 5.5 years maturity. While, $1.25 billion have yield 4.45 percent per year for 10 years maturity.

Finance ministry said, the settlement is scheduled on Feb. 20. It will be listed in Singapore Stock Exchange dan Nasdaq Dubai. Deutsche Bank AG, Dubai lslamic Bank PJSC, Maybank Investment Bank Bhd, PT Mandiri Sekuritas, and HSBC will be joint lead managers and joint bookrunner. Meanwhile, PT Bahana Sekuritas, PT Danareksa Sekuritas, and PT Trimegah Sekuritas Indonesia Tbk (IDX: TRIM) will become the co-managers.

Indonesia has issued the first Green SUKUK in February, 2018 with worth $1.25 billion, which is designed to comply with Islamic Law. This issuance marked Indonesia as the first Asian country to sell a sovereign Green SUKUK. The proceeds from the green bonds would be used to finance projects such as renewable energy, green tourism and waste management.

The government has also said it will take up more projects to address climate change mitigation and adaptation, which requires alternative financing. CIMB, Citigroup, Dubai Islamic Bank PJSC, HSBC and Abu Dhabi Islamic Bank were bookrunners on the deal.

The Ministry of Finance stipulates that the gross issuance of Government bond in 2019 is Rp825.7 trillion ($58.97 billion), down from the target in the 2018 State Budget of Rp856.49 trillion.

Previously, Finance Minister Sri Mulyani Indrawati said in determining the financing strategy next year, the ministry had considered a number of external and internal factors, such as Fed Funds Rate and an increase in US Treasury yields in line with the increase in the dollar index on financial markets.

Beside, there is a challenge that must be faced is the pressure that comes from the current account deficit. She assured that the government was committed to be careful in managing financing and debt this year.

Some of the strategies, said Indrawati, included the auction of Government and Sharia State bond, each of which is held 24 times. The composition of Government bond issuance reaches 75 percent of the total issuance, while around 25 percent is issued on Sharia bond.

However, according to the ministerit will depend on the market conditions that occur next year. He comments, “Flexibility in utilizing debt financing sources to ensure the fulfillment of APBN needs.”

While based on denomination, as many as 17 percent of the Government bond will be issued in foreign currencies. For foreign exchange denominations it is intended as complementary and avoids crowding out effects in the country, she said.

Next, for non-auction mechanisms, for an example book-building for retail investors and the method of selling private placement bonds are set aside around 24 percent of total gross issuance.

Sean Kidney, CEO of Climate Bonds Initiative Indonesia has huge pipeline in green investment. Some projects are capable to be financed by the eco-friendly scheme such as investment in railway in Java, the water infrastructure investment and green and energy efficient building in big cities.

Global green bond issuance hit a record for the fifth consecutive year in 2017 and bankers expect further growth in the market this year. In Asia, Chinese and Indian companies have led the way in tapping the green market to finance environmentally friendly projects but governments had until now stayed away.

Worldwide, countries to have sold sizeable amounts of green bonds include Poland – the first-ever – and France.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com

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