Indonesia: worth another look?

In the light of Megawati's coming to power and new technocratic cabinet, what's the mood here in Indonesia now?
On the business side it is definitely cautiously positive. The corporates see stability and more consistency, and people are gearing up for better business in this environment. On the banking side, the same applies. The only group for which this doesn t apply is the foreign investors, who have not come yet.
If this consistency prevails, people will start investing. People have been investing slowly, with profits from operations being balanced between investing a little and keeping the rest. But now, there could be more funds put to work.
The corporates I know are running at high capacity, and given the global environment this is actually quite good.
Has Indonesia become almost self-sufficient? It' s got so used to not having foreign capital here, that it s almost insulated against the outside world?
In the last few months that has been the case. The global capital markets were closed to Indonesia, and so Indonesia has been close to self-sufficient.
The good thing is it less affected by capital movement. But then again, the total funds that are required are bigger than what the banks can provide.
The image of Indonesia, as seen from places such as Hong Kong, is that it is a disaster zone. But I'm led to believe by some clever investors that some companies are running here with very high operating margins and dividend yields.
I think this is true. Part of this disparity is thanks to the Indonesian culture. Indonesians are probably the least outspoken people in Asia. And they are not that good at PR. This is an area where Indonesia needs to improve. So people in Hong Kong or further afield does not see the good companies and just watches CNN. But there has actually been a lot of good things happening, and the things you see on CNN are not proportionate to the good things that have been happening from a business perspective.
PT Telkom is one of the healthiest telcos in Asia at the moment.
Yes. And Indosat, which after its asset swap with PT Telkom is sitting on a few hundred million US dollars of cash. The cellular subscriber rates were growing at almost 100%, and there is still a lot of room for growth. Sampoerna is another company that has been doing very well.
Is the restructuring business still thriving, or is much of that done now?
The big mandates have been assigned. But the debt restructuring is normally just the first part. Then you have the capital restructuring, and capital raising. And all these companies are still functional - this is not a liquidization situation. It's more about debt stretch-outs, and debt equity conversions.
What are the key restructuring mandates you're working on right now?
APP obviously. Gadjah Tunggal Petrochemical, London Sumatera Plantation, Citra Marga and we re finishing Bimantara.
These restructuring deals must be quite demoralising. They take so long to do.
Initially there is always an adjustment for the bankers if they haven' t done any restructuring. But it is also very interesting because it's a different field of investment banking. We don' t pick people for these assignments without thinking ahead as to whether it will suit their personality.
What s the average length of time your restructurings have taken?
It really varies. For example, Sampoerna was the fastest and took approximately five months from being mandated to getting it signed. Gadjah Tunggal has been going on since the beginning of 1999. Satelindo was about one and a half years. Indocement was about two years.
Are you optimistic there will be a faster pace of asset sales by IBRA going forward?
The asset disposal will have to speed up, in part because they are below budget. Definitely it will have to speed up.
Is there a sense in Indonesia that foreign buyers are not welcome, when it comes to selling these assets?
No, I don't think so. From a general perspective, Indonesians are not that sensitive about foreigners coming in.
You are involved on some privatizations.
Yes. Bank Mandiri and Indosat.
Will Bank Mandiri happen this year?
It is difficult for me to comment as we are in the quiet period. We will try to move as soon as possible.
What will be the split between foreign and local distribution?
When BCA was done, it was mostly local. But that was also done when the market was also almost shut down for Indonesia. We hope that with this new government, the positive sentiment may start to prevail and we should have a bigger foreign portion.
This will be the first international roadshow from an Indonesian company for a while?
We did Indofood in 1999. That was a secondary placement and not an IPO like Mandiri.
So this will be the first Indonesian IPO roadshow since the crisis?
Yes, definitely.
So will this raise real challenges?
The challenge is definitely there. But it also creates opportunity. If it is done correctly. I am quite optimistic.
The real issue will be persuading investors that Mandiri is a good bank with a bad zip-code. A case of - Forget what you've heard before, just listen to the story.
Like anything, things go in cycles, and Indonesia has been in the low cycle for the last four years. From my perspective, a lot of positive things have happened and people need to differentiate. This is a big country with more than 200 million people, and rich in resources. It has moved from one system to a new one, and there has been adjustment. In other countries it could have been much worse. There could have been total chaos. So personally, I am very optimistic.