Sales of Sovereign Bonds in the International Primary Market

The government has come to realize that the current regulation on the sales of sovereign bonds, particularly those in the international primary market had not been implemented effectively. In order to ensure greater effectiveness, the government via the Minister of Finance has issued Regulation No. 170/PMK.08/2009 to amend Regulation No. 217/PMK.08/2008 which has already been amended by Regulation No. 32/PMK.08/2009).

The sovereign bond is a bond issued by a national government in which is denominated in foreign currencies - or in Indonesia this bond is known as the State Debt Securities (Surat Utang Negara / SUN). While an international primary market is any market that offers and sells sovereign bonds outside Indonesia’s jurisdiction for the first time.

The regulation amends 3 articles and inserts an additional provision. These are Articles 5, 6, and 9, plus the insertion of Article 13A.

Article 5 has been amended to add stages to the selection process. The three new stages are:

The government retains the discretion to determine the number of sales agents to be appointed. The number appointed will be based on need.

The provisions relating to the beauty contest and the fees negotiation are included in Article 9. This constitutes the addition of a further two steps in the process for those wanting to be selected as a legal consultant.

It must be noted that the role of a legal consultant in this context is to support the preparation and implementation of the sale of sovereign bonds in the international primary market.

In addition, the regulation has inserted new provision between Articles 13 and 14. This provision, Article 13A, provides the Minister of Finance has the right to appoint an international financial institution to act as its listing, clearing and settlement agent, interest payment agent, and / or trustee, among others.

Nevertheless, it is worth noting that the Minister can only appoint the relevant financial institution or agency after being given the authority to do so from Bank Indonesia (BI), and having BI provide a recommendation for a suitable institution of agency for the task.

The regulation has been in force since 4 November 2009.