20000218

Indonesia central.bank says recap bonds need fixing

JAKARTA: The deputy head of Indonesia's central bank urged foreigners to help kick-start the country's new and already ailing recapitalisation bond market but conceded changes were needed.

There have so far been no trades in the market. It started last month with 28 trillion rupiah in the bonds issued by the government to recapitalise Indonesia's collapsed banking sector.

"I think we have to fix it," Anwar Nasution told foreign businessmen.

Buyers are insisting on deep discounts which the banks have so far refused to accept, and there are concerns that if the market fails to pick up the whole bank restructuring process will suffer.

Nasution pointed out that the central bank's own short-term paper carried about the same rates as those for the longer-term recapitalisation bonds which are by the finance ministry.

On Wednesday, chief economic minister Kwik Kian Gie said the government was considering changes to the terms for the bonds but did not elaborate. Nasution also said that domestic institutions, such as pension funds, could not absorb the full amount involved which he put at around 610 trillion rupiah.

"That's why we need the participation of foreigners."-Reuters