SBY Urges Business to Play Ball

03 January, 2012 | Source: Jakata globe

President Susilo Bambang Yudhoyono opened the year’s trading at the stock exchange on Monday, and called on the business community to take advantage of the investment-grade status recently given to the country.

Yudhoyono said that with the new status accorded to Indonesia by Fitch, an international rating agency, money costs and loans would be cheaper, giving companies the opportunity to obtain easier long-term funding to develop their businesses.

The upgrade could also result in a massive influx of funding from investment companies.

Fitch raised Indonesia’s sovereign debt rating to investment grade on Dec. 15, 14 years after the country lost that status amid the Asian financial crisis. Fitch cited the country’s “strong and resilient” economy for the upgrade. The agency also raised Indonesia’s long-term and local currency debt rating to BBB- from BB+.

The president said the government and Bank Indonesia would continue to pursue solid and prudent monetary and fiscal policies to provide “more room for the critical sectors to move.” The ball, he added, is now in the court of the business community to help develop the economy.

Yudhoyono, who was accompanied by the chief economic minister, Hatta Rajasa, Finance Minister Agus Martowardojo and the state enterprises minister, Dahlan Iskan, likened the roles of policy makers and the business community to “the defense and attacking lines” in a football game.

“If we only strengthen our defensive line, we will not score and will not win the game. We need to keep a balance between the defensive line and the offense to reach the goal,” he said.

The president also urged Indonesian companies to be more aggressive as “the forward line and strikers” in the global game of commerce.

He urged Indonesian companies to reinvest profits into the country’s economy to help spur growth and create jobs.

Indonesia’s economy is forecast to expand by 6.3 percent this year from an estimated 6.5 percent in 2011, according to the central bank. Analysts attribute the growth to economic stability and strong domestic consumption.

“Demand and consumption in Indonesia keep increasing. We have to make sure that production also increases to meet these demands,” Yudhoyono said.

Private consumption accounts for around 58 percent of the country’s economy.

Separately, Hatta said other rating agencies such as Moody’s Investors Service and Standard & Poor’s were expected to follow Fitch and upgrade Indonesia to investment- grade status.

“The biggest funds in the global capital market are pension funds. And most of these pension fund managers are only allowed to invest in countries with investment grade status,” he said.

“This [upgrade] will increase inflow to the country, but it will not cause volatility because pension funds are typically invested in for the long term.”

Citing data from the Indonesia Stock Exchange, Yudhoyono said that total combined market capitalization may have increased by 8.4 percent to Rp 3,518 trillion ($387 billion) in 2011, from Rp 3,247 trillion in 2010.

The number of listed companies rose to 534 from 515 in 2010.

“We need to maintain a solid market, a growing market, and give the best service to investors so that funds will flow into the country,” the president said.

“Also, we need to maintain and improve the performance of our economy including the capital market.”

Indonesia’s main stock gauge rose 3.2 percent last year, slowing from 46 percent in 2010. Still, it was the third-biggest gainer in the world, behind a 5.7 percent gain in the Dow Jones and the 4.1 percent increase in the Philippine Stock Exchange.

 

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