Roadmap
Indonesia’s successes, challenges, and funding needs
Building the bridge: developing domestic capital markets
Trends in EM capital markets
Strengthening the government bond market in Indonesia
Diversifying the investor base
Developing corporate and equity markets
Take-aways
Indonesia regained MIC status in the early 2000s
…
Overcoming Financing Constraints
3
Indonesia GNI Per Capita
Indonesia GNI per capita, Atlas method (current US$) Middle-income GNI per capita threshold, 2014
Source: World Bank Development Indicators
But financing growth has become more difficult
…
Net ODA 2005-2013 (indexed 2005 level)
Upper middle income
Indonesia
Source: World Bank World Development Indicators
Commodity prices
Capital flows to EM
Bank lending
Pressures on EM FX
Financial mkt volatility
And investment needs are still huge
Overcoming Financing Constraints
5
Investments, particularly in infrastructure, are needed to foster economic
growth, eradicate poverty and ensure prosperity for all
Source: World Bank Policy Research Paper, Rui-Nunez & Wei 2015 Note: EAP* excludes China
35
EAP & EM Infrastructure Investment Requirements Vs. Actual
Actual Needs
Singapore Malaysia Thailand Vietnam Philippines Indonesia Global benchmark
%
Infrastructure Stock (% of GDP, 2012)
Potential sources of financing are out there
…
Global capital markets are a deep source of funding
48.1
Global InsOtuOonal Assets Under Management
3.50%
Average current and target infrastructure porRolio allocaOons
2011-2014
Average current allocaXon Average target allocaXon
Forecast
So, the question is:
Overcoming Financing Constraints
7
Developing capital markets
…
How to connect the trillions of dollars of institutional resources looking for
Developing capital markets usually starts with a robust government
bond market
…
Enhances
mobilization
of savings
through
based pricing
and
benchmarks
But developing capital market development involves a number of
actors and factors
…
9
Debt Market
Development
Clearing and
Settlement
Regulatory
Regime
Post Asian Crisis, many Emerging Markets have focused on
deepening domestic bond markets
…
From original sin to virtue?
0
Emerging Market Sovereign Debt by Domicile
Backed up by stronger fundamentals
Overcoming Financing Constraints
11
In 2001, most EMs had a large net FX debt position but by 2014 that position had
reversed
Net External Debt 2001 Net External Debt 2014
Source: World Bank, IMF, JP Morgan, Bank for International Settlements
Indonesian authorities also have been promoting domestic
government bond markets
Average Daily Trading of Domestic Government Securities
Source: DMO
Domestic Government Debt Securities Yield Curve
But despite important successes, market depth still lags behind that
of peers
…
Overcoming Financing Constraints
13
0.00 0.50 1.00 1.50 2.00 2.50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
RaOo of external debt to domesOc debt
Indonesia Emerging Asia Total Emerging Markets
