Indonesian paradox

The local rupiah debt market is tipped by some to be massive. But a recent CSFB research report raises some paradoxical questions.

Over an evening of racing at Hong Kong's Happy Valley, a bankerĀ I know was enthusing about the potential of the Indonesian local bond market. He cited the recent Rp1 trillion $116 million bond deal for Indofood, and noted that there were 1,000 people at the roadshow presentation in Jakarta.

Certainly, no country needs a local bond market more than Indonesia. But there may be a problem. For at the heart of every successful debt market is a government bond market, off which the corporate sector can price its issues. The impression I had after reading a recent CSFB report is that the Indonesian government is going to find it difficult to sustain...

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