Michael Richardson, Singapore – Indonesia's total foreign debt may amount to $200 billion, nearly double the level recorded by the government in Jakarta, according to an estimate made public Tuesday amid rising doubts about East Asia's capacity to repay loans.
The estimate, by the Indosuez bank group, takes into account $83 billion in undeclared offshore borrowing by Indonesian companies.
Even based on the official figure of Indonesian corporate debt - $65 billion - Indonesian companies will have to repay $50 billion in 1998 unless foreign banks agree to roll over or reschedule the loans, bankers said Tuesday.
Excessive short-term borrowing in dollars by Indonesian companies, including many of the largest, before the Indonesian rupiah started to plunge in value has created this looming debt repayment crunch.
The scale of the interest and principal repayment bill, which amounts to more than double the level of Indonesia's foreign exchange reserves, is undermining confidence in the country's currency, stock markets and economic future.
Some analysts are now drawing a parallel between Indonesia and South Korea, where the debt crisis stems from foreign creditors' reluctance to roll over an estimated $100 billion in short-term debt, much of it held by the private sector.
On Tuesday, South Korea gave foreign bankers a full account of the country's overseas debt crisis for the first time, hoping to prevent them from triggering a default. In both countries despite multibillion-dollar standby loans arranged by the International Monetary Fund recent rapid falls in the value of their currencies against the dollar have made it much more expensive for companies to repay, or even service, their loans.
The rupiah has plummeted more than 50 percent against the dollar since the middle of the year. "This meltdown in its currency could lead to a wave of corporate bankruptcies, and this could be very destabilizing," said David Hale, Chicago-based global economist for the Zurich Kemper group. "Half of Indonesia's major corporations are technically bankrupt if we don't get the rupiah back to 3,000 or 4,000" to the dollar, he said.
The dollar rose Tuesday to 5,245 rupiah from 5,100 rupiah Monday.
Indonesia is the world's fourth most populous nation and its fourth largest debtor. Official figures put Indonesia's combined government and private debt at $117 billion, of which $65 billion is private.
Bankers and economists have little doubt about the government's capacity to repay its foreign debt, much of which carries concessional interest rates and long repayment terms.
But C.J. de Konins, lndonesia country manager for ABN-AMRO Bank of Holland, said that the average maturity of the Indonesian corporate debt was only 18 months. "Which means the private sector repayment obligations are $3.6 billion per month and $43 billion in the coming year," he said. "Add to this the interest to be paid of nearly $6 billion per year and one can easily understand that $49 billion payment obligation creates an immense hurdle.
Pablo Zuanic, head of research in the Jakarta office of lndosuez W.I. Carr securities, said that economists in the French financial services group had estimated that at least $44 billion in offshore bond borrowings by Indonesian companies were not included in the official private sector debt figure nor were short-term off-shore borrowings.
'In total, it would not be farfetched to assume that the total Indonesian foreign debt amounts to $200 billion," he said. With three quarters of this debt being private, and at least a third maturing over the next 12 months. it is not hard to see where the pressure on the rupiah is coming from."
In a meeting Monday with representatives of major Indonesian companies, President Suharto said that the private sector must work closely with the government to overcome the country's troubles. 'The problem is companies are using short-term loans for long-term projects," he said.
Mr. Suharto, who recently returned to work from a 10-day rest period ordered by his doctors that further unnerved the markets, said he had appointed Radius Prawiro, a former coordinating minister for the economy, to head a task force to help firms renegotiate foreign loans to gain more time for repayment.