Jakarta – Foreign loans borrowed by Indonesia's private sector nearly doubled during the first half as companies began increasing their spending to finance expansion following a slowdown in the recovery from the US-lead global financial crisis last year.
Central bank data showed foreign loans of the private sector in the first half of this year jumped 92.4 percent to US$15.7 billion from $8.2 billion in the first six months of last year.
"The relatively high jump compared to last year is due to a contraction in the first half of 2009 regarding the subprime mortgage crisis," BI spokesman Difi A. Johansyah said on Wednesday.
Difi added that the 2010 figure was higher than the $14.8 billion recorded in the first half, 2008, before the mortgage crisis hit the national economy. He said the sharp increase in the private sector's foreign loan during the first half this year indicated that the local industries had begun to expand their business following the slowdown caused by the global financial crisis.
"The mining and excavation sector, as well as electricity, gas and clean water sector led to an increase in foreign loans for the private sector," Difi said, citing a 404.6 percent and 121.4 percent jump in both sectors.
According to Difi, the jump followed the sharp increase in the demand for coal from new power plants in the country and from China and India.
Coal mining companies mostly raised more loans this year to finance their production expansion to meet the surge in the demand.
A number of large power plants are currently under construction and are mostly financed by foreign loans, some of which are from Chinese banks.
BI data showed that 64.6 percent of the total foreign loans borrowed by the private sector during the first semester, 2010 were provided by creditors, the remaining 35.4 percent of the loans came from affiliated firms.
"This reflects growing interest from new foreign investors in Indonesia's private sector," Difi said.
The increase in the foreign loans for the private sector, Difi added, reflected the rise of activities in the real sector.
Many economists, however, were concerned that the larger part of the loans were not used for productive activities. They said loans could be mainly disbursed for consumption purposes, not for productive activities which could create more employment and spur economic growth.
But Difi explained that 49 percent of the foreign loans or about $7.7 billion disbursed to the private sector were used for working capital.
Purbaya Yudhi Sadhewa, head of research at Danareksa Research Institute, said the figures of foreign loans for the private sector reflected how Indonesia's economy had returned to its normal level, like that before the 2008 financial crisis. (est)