DAHLAN SIAMAT
Director of Islamic Financing
Ministry of Finance – Republic of Indonesia
A Presentation on Asian Regional Public Debt Management Summit
Organized by Bank Negara Malaysia and Asian Development Bank (ADB)
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I. GOI Sovereign Sukuk:
Roadmap, Preparation, and Impediments
Roadmap: GOI Sovereign Sukuk
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Preparation of Sukuk Issuance
• legal basis;
• underlying assets;
• establishment of SPV;
• transfer of asset: beneficial title vs legal title;
• trust concept;
• taxation.
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II. GOI Sukuk Management:
Policy and Strategy
GOI Sovereign Sukuk Issuance:
Major Objectives
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Debt Instruments for Budget Financing
• Wholesale
• Retail
Sovereign
Debt Sukuk • Islamic T-Bills
Instruments • Project Financing
Foreign Loan
Loan
Domestic Loan
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GOI Sovereign Sukuk Development
Sukuk Issuance
and Market Underlying
Development Assets
Preparation
Preparing state-owned assets
Domestic and Global Sukuk Identification of infrastructure
Sukuk Structure projects
Bookbuilding vs Auction Use of GOI shares in SOE for
Private placement Exchangeable Sukuk
Secondary Market development Use of services
Primary Dealer System
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GOI Sukuk Issuance Program
Bookbuilding:
- Wholesale Sukuk
- Retail Sukuk
- Project-based Sukuk
Private placement:
- IDR or foreign currency denominated
Regular issuance in International Market:
- Global Sukuk
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GOI – SPV Profile
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Underlying Assets:
State-Owned Assets
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GoI Sukuk Issuance:
Transaction Document
Ijarah/Istisna`/Musharaka Agreement
Management Agreement
Purchase Undertaking/Sale Undertaking
Service Agency Agreement
Cost Undertaking
Syariah Endorsement
Offering Memorandum/Prospectus
Purchase Agreement
Declaration of Trust
Listing Application
Certificate Purchase Agreement
Agency Agreement
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III. GOI Sukuk Market Development
GoI Sukuk Products:
An Overview
Islamic T-Bills (SPN-S)
Regular Sukuk
Fixed / floating rate Short-term
Medium to long term (>5 years) Discounted
IDR / USD denominated Tenor < 12 months
Tradable at market price Coupon payable at maturity
Bullet payment at maturity Tradable at market price
Issued through auction or bookbuilding Objectives: cash-mismatch financing &
Objective: State Budget financing Islamic money market development.
Islamic
Financing
Instruments
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Key Factors of
Domestic Sukuk Market Development
DEEP & LIQUID MARKET
Sufficient Market Absorption Capacity & Efficient Price/Yield
PRIMARY MARKET
DEMAND •ACTIVITIES:
Regular Issuance (Bookbuilding, Auction,Private Placement)
• Banks •INFRASTRUCTURE: SUPPLY
• Securities Companies Trading System, Institutional Infrastructures
• Mutual Funds • Bonds
• Foreigners SECONDARY MARKET
• Pension Funds •ACTIVITIES: • Sukuk
Buy-Sell, Buyback
• Insurances
•INFRASTRUCTURE:
• Central Bank Buyback System, Primary Dealers, Selling Agent,
Repo,BenchmarkYield Curve, Brokers/Dealers
Undeveloped market:
• illiquid secondary market
• buy and hold perspective
• no benchmark
• price discovery mechanism
• lack of market infrastructure
Tax regulation
Investors perspective on expected yield
Underlying assets
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GOI Sukuk Market Development:
Opportunities
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Sukuk Structure:
Ijarah - Sale and Lease Back
Issuance and Coupon Payment
SPV Investors
1d. Proceeds (Issuer/ Trustee)
1c. Proceeds
Secondary Market
MoF - GOI
(Obligor/Originator)
SBSN Series
Description
IFR-0001 IFR-0002
Total Bids IDR 4.839 T IDR 3.231 T
Total Alloted IDR 2.714 T IDR 1.985 T
Highest Bid Yield 13.50% 12.75%
Highest Accepted Yield 11.80% 11.95%
Coupon 11.80% 11.95%
Price 100% 100%
Issuance Date/Settlement Date 26 August 2008 26 August 2008
Maturity Date 15 August 2015 15 August 2018
Coupon Payment Period Semi annual Semi annual
Bid to cover ratio 1.78 1.63
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IDR Sukuk Issuance:
Distribution by Investor Type
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USD 650 Million Debut Sovereign Sukuk
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GOI Sukuk Maturity Profile
(as of October 19, 2009)
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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Total 2.69 - 5.56 - 6.16 2.71 - - 1.99 - -
SDHI 2.69 - - - - - - - - - -
SNI - - - - 6.16 - - - - - -
SR - - 5.56 - - - - - - - -
IFR - - - - - 2.71 - - 1.99 - -
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Average Daily Trading – Government Islamic Securities
(as of October 16, 2009)
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Ownership of Government Islamic Securities
(as of October 16, 2009)
[in percentage]
INSTITUTIONS Apr‐09 May‐09 Jun‐09 Jul‐09 Aug‐09 Sep‐09 16‐Oct‐09
Total Banks 11.63 8.76 7.95 7.91 7.85 8.06 7.91
‐ Conventional Banks 4.16 2.25 2.03 1.99 1.74 1.95 1.81
‐ Islamic Banks 7.47 6.52 5.92 5.92 6.10 6.10 6.10
Insurance Company 31.39 27.58 24.96 25.02 24.54 24.48 24.52
Pension Fund 7.77 6.83 6.17 6.16 6.14 6.14 6.14
Individual 29.15 19.81 17.33 17.27 17.25 17.23 17.20
Mutual Funds 6.90 12.88 12.45 12.39 13.00 13.13 13.39
Non Resident 0.73 0.59 0.64 0.67 0.64 0.67 0.62
Others 12.43 10.79 9.73 9.83 9.83 9.53 9.46
Departemen Agama 0.00 12.76 20.75 20.75 20.75 20.75 20.75
TOTAL 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Notes:
* Others consist of Corporate, Financial Institutions, Securities Company, Foundation, etc
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Indonesia`s Credit Rating
Solid economic fundamentals helped the improvement of Indonesia`s sovereign credit rating since
2001
Moody`s Investors Service just upgraded Indonesia`s foreign and local-currency sovereign debt ratings to Ba2 with stable outlook.
The upgrade was prompted by the Indonesian economy`s relatively strong resilience to the global recession, healthy medium-term
growth prospects as well as its prudent debt management.
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Thank You