INDONESIA DEFERS MORE DOWNSTREAM PROJECTS

Indonesia's mounting foreign debt problems have caused it to further rein its ambitious downstream expansion plans. In the latest move, the government late last month put a ceiling of about $5.9 billion/year in commercial foreign debt for 15 projects, notably involving petrochemicals and other petroleum related areas. In the current fiscal year, Indonesia's central bank will be limited to raising $400 million in foreign funds, state banks limited to $1 billion, private banks $500

Nov. 11, 1991

3 min read

Indonesia's mounting foreign debt problems have caused it to further rein its ambitious downstream expansion plans.

In the latest move, the government late last month put a ceiling of about $5.9 billion/year in commercial foreign debt for 15 projects, notably involving petrochemicals and other petroleum related areas.

In the current fiscal year, Indonesia's central bank will be limited to raising $400 million in foreign funds, state banks limited to $1 billion, private banks $500 million, private companies $2.5 billion, and state companies $1.5 billion.

MORE DEFERRALS

Less than 2 weeks prior to that action, the government postponed work on four other major processing sector projects valued at a combined total of $9.8 billion.

They include:

An expansion of a second aromatics plant at Arun, Aceh, currently under way.
Installation of a resid conversion complex at the Cilacap refinery in West Java.
Construction of the proposed EXOR IV export refinery at Dumai, Riau.
Installation of PT Chandri Asri's $2.4 billion olefins complex at Serang, Java.

Still authorized to proceed in fiscal 1991-92 are:

An upgrade of the Musi refinery in South Sumatra.
Construction of another liquefied natural gas train at Bontang in eastern Kalimantan at a cost of $750 million.
Construction of a $440 million gas pipeline from offshore Kangean gas field to Gresik, Surabaya.

Late last month the government approved a proposal by Pertamina and a private company to raise funds for energy projects in Java, but capped foreign borrowing on the projects at $1 billion.

Pertamina would use the funds for a proposed products pipeline network in West Java. The government noted the pipeline would be fed by a $2.7 billion refinery under construction at Balongon, West Java.

The undisclosed private company would use foreign financing for a proposed 600,000 electric power plant in East Java.

EARLIER DEFERRALS

The latest steps follow a move in September deferring about $28 billion in projects by state oil company Pertamina in response to President Soeharto's appeal that state companies reassess spending plans in light of the country's worsening balance of payments crunch (OGJ, Sept. 9, Newsletter).

At the time, the government excluded from postponement state or state related projects funded with private nonrecourse loans. However, such projects were included in the latest deferrals.

Soeharto appointed a team under his economic minister, Radius Prawiro, to study more than $80 billion worth of foreign lending for private and state projects in Indonesia. The team is intended to step up vigilance over Indonesia's foreign debt status and ensure Indonesian projects seeking foreign funding enter the market in a more orderly way, Prawiro said.

Reducing that debt by deferring projects carries its own costs, however. Indonesian Industry Minister Hartarto noted that deferring the olefins project, already under construction, would mean Indonesia will spend about $1 billion on petrochemical imports in 1991, about even with 1990's level.

The International Monetary Fund in March estimated Indonesia's foreign debt at $66 billion.