Indonesia hails China’s backing for panda bond amid investor concerns over rules

Indonesia’s efforts to woo back Chinese investors may be gaining traction after Finance Minister Purbaya Yudhi Sadewa returned from Beijing with a multibillion-dollar funding commitment and political backing for the Southeast Asian country’s debut yuan-denominated sovereign bond.

Whether the bilateral talks translate into lasting investor confidence in Indonesia’s economic fundamentals remains to be seen, as global companies continue to weigh Jakarta’s shifting rules, challenging budget outlook and push to tighten state control over key resources, according to analysts.

Jakarta sent Purbaya to Beijing last week to shore up confidence ahead of next month’s planned panda bond sale – Indonesia’s first renminbi-denominated bond issuance in mainland China.

Last month, a letter attributed to the China Chamber of Commerce in Indonesia and addressed to President Prabowo Subianto said Chinese companies’ “long-term investment confidence” in the country had been “directly undermined” by issues related to “excessively stringent regulations, over-enforcement, and even corruption and extortion by competent authorities”.

Many Chinese investors that Purbaya met in Beijing were “initially concerned about our fiscal situation, as they were told the state budget was unsustainable, and many rating agencies were giving seemingly negative signals about [Indonesia]”, he said in a statement on June 18.

Purbaya said that he assured investors that Indonesia’s fundamentals were sound, “and they said that they would almost certainly buy the panda bonds that we will issue”.