Govt cancels plan to issue gas-backed bonds

The government has decided to cancel its plan to issue gas-backed bonds worth US$1.5 billion because of stronger oppositions from its international creditors, Koran Tempo daily reported on Monday (May 21).

An expert staff at the Finance Ministry, Anggito Abimanyu, said: "The securitization of assets for this year has been canceled. The international community wants us to review the plan using international regulations."

Anggito said both multilateral creditors, especially the World Bank, and bilateral creditors, especially Japan, opposed the planned issuance of $1.5 billion bonds to be backed by the government's future receivables from the sales of natural gas from West Natuna in Riau to Singapore.

Japan, as Indonesia's largest bilateral creditor, would send its deputy finance minister to Indonesia to ensure that Indonesia would not issue the bonds, Anggito said.

World Bank's country director for Indonesia Mark Baird has also stated that the bank strongly opposes the planned issuance of the assets-backed securities because it would breach a clause of the agreement between the bank and the Indonesian government.

Anggito noted that they were all very concerned about the planned issuance of the assets backed securities because "Indonesia has a huge debt to them."

"If the government's capacity to pay the debt improves, the international community will likely not anymore reject the plan," Anggito said, adding that the government could still revive the plan in the future.

The government has actually selected five global investment banks as its financial advisors to issue the assets-backed securities. They are J.P. Morgan, Merryll Lynch, Morgan Stanley, Credit Suisse First Boston, and Salomon Smith Barney.

But the plan has been opposed by all Indonesia major creditors, including the World Bank, the Asian Development Bank, the International Monetary Fund and Japan. They are all concerned that Indonesia will face difficulties to service its debts to them in the future. (*)