Indonesia must offer the comfort of stability to foreign investors to attract private equity capital, Indonesia’s finance minister M. Chatib Basri said at the CLSA Investors’ Forum 2013 in Hong Kong this week.
“The most important [thing] is to address the concerns [of foreign investors] and the main concern about the Indonesian economy is the current account deficit,” Basri explained. Indonesia’s current account deficit reached 4.4 percent of GDP at the end of the second quarter, he said.
“In the short term we are really focusing on this by curbing the import of oil and gas. We adjusted the fuel price last June and introduced this policy of using biofuel. I do believe in our forecast for [Q3], the deficit will be much lower than in the previous months.”
Basri also addressed the currency issue in Indonesia, saying that its volatility was a major roadblock for foreign investors. The Indonesian rupiah has depreciated dramatically to IDR 11,535 to the dollar, compared to IDR 9595 to the dollar in September last year.
The most important [thing] is to address the concerns [of foreign investors] and the main concern about the Indonesian economy is the current account deficit…I do believe in our forecast for [Q3], the deficit will be much lower than in the previous months.
M. Chatib Basri, minister of finance, Indonesia
“It is not really a matter of the level [of the currency], but instability. This makes it difficult for people to make predictions,” he continued. “What we need, what we want, is a more stable Rupiah.”
Private equity firms have voiced concerns about the instability of Indonesia’s currency, as well as its political unpredictability. However, more firms have been moving into the country to look for investments.
Investment in Indonesia from private equity firms spiked 83 percent year-on-year during the first nine months of 2013, to $152 million from just $83 million during the same period in 2012, according to data from Thomson Reuters.
Indonesia also housed some blockbuster exits this year. In May, TPG and Northstar Pacific Partners sold 24.26 percent of Bank Tabungan Pensiunan Nasional (BTPN) to Japanese Sumitomo Mitsui Banking Corporation, submitting an application to regulators to sell another 15.74 percent in a second deal. The combined sales worth $1.52 billion stood to gain the firm a 7x return.
On the Jakarta stock exchange, in a long-awaited partial exit, the Asian arm of European buyout firm CVC Capital Partners sold 40 percent of Indonesia-based Matahari Department Stores in March.
The deal was worth $1.3 billion, having priced the 1.17 billion shares divested at Indonesian Rp 10,850 (€0.86; $1.12) per share, a source close to the matter confirmed to Private Equity International earlier. CVC expects to gain a 7x-8x return on its investment, a source close to the firm said, although CVC would not comment on the exit multiple.