Indonesian President Joko Widodo gestures as he talks during an interview at the Presidential Palace in Jakarta, Indonesia. - Reuters
JAKARTA: The Trans-Java toll road, a 1,167-km expressway snaking across Indonesia’s main island, is meant to be part of President Joko Widodo’s legacy-defining infrastructure push that helps bring the country’s economy into the 21st century.
Yet for those who follow the nation’s debt markets, the project – and other big ticket investments like it – are also a testament to the dramatic spending spree over the past decade by Indonesia’s largest builders and developers, many of which are now highly levered and face looming maturities.
The country’s top four construction firms – including the toll road’s main builder, state-owned PT Waskita Karya – have seen their total debt surge more than 12 fold to roughly 130 trillion rupiah (RM37bil) since Jokowi, as the president is known, took office.
Despite restructuring 29 trillion rupiah (RM8.27bil) of bank loans in 2021, Waskita Karya has appealed to Jakarta for a fresh capital injection.
Private property-development companies are also juggling mounting obligations, just as rising interest rates sap demand.
The struggles are already reminding some analysts and investors of the high-profile debt debacles in China and South Korea last year, which were centred on the nations’ developers.
And while they’re quick to note significant differences, a few warn that it may only be a matter of time before the financial strain spreads even further among Indonesian firms, fuelling another potential hotbed of distress in Asia.
“The amount of debt that has been accumulated by construction companies in Indonesia draws similarities to what has happened in other countries, such as China’s property sector,” said John Teja, president director of PT Ciptadana Sekuritas Asia.
“Something has to be done this year or the problem could spread to other sectors like suppliers and vendors.”
Waskita Karya’s debt woes could quickly come to a head. It has 2.3 trillion rupiah (RM656.10mil) of local bonds maturing later this month and another 2.4 trillion rupiah (RM684.63mil) due by May 2024, according to data compiled by Bloomberg.
When asked about the company’s broad debt situation, president director Destiawan Soewardjono said: “I’m looking for long-term financing from abroad so we have more breathing space and time to rearrange our finances.”
Concerning the upcoming bond maturities this year, Soewardjono said the company “will make every effort to settle the obligations and continue to coordinate intensively with stakeholders and related ministries.”
The company is seeking to resume a delayed three trillion rupiah (RM855.78mil) rights issue to the government by mid-year, while reviewing its restructuring agreement with bank lenders, and enter strategic partnerships for its toll-road assets in order to improve liquidity and cut its debt load.
“We are pushing for a fundamental restructuring” of the company, said Kartika Wirjoatmodjo, deputy minister of State-Owned Enterprises, when asked about Waskita Karya. — Bloomberg
