Jakarta. On Friday, Aug. 14, President Prabowo Subianto addressed Indonesia's parliament. In his speech, he said something important. He said a Chinese company called China Lianhe Rating gave Indonesia's “Panda Bonds” a AAA rating. AAA is the highest score this company gives. He then linked this to good comments from another company called S&P. He said this proves the world sees Indonesia's economy as strong.

The AAA rating is real. China Lianhe Rating did give it. But the way President Prabowo explained it is not fully correct, and people should understand why.

First, it helps to know what a Panda Bond is. It is money that Indonesia borrows from China. Indonesia sells this debt inside China's own market, using Chinese money, called yuan or renminbi. Many countries do this to get money from new places, not just from the usual markets like the US or Europe.

Here is the main problem. China Lianhe Rating only checks companies and countries that borrow money inside China. It does not check Indonesia's overall ability to pay back debt to the whole world. It only checks this one bond, in this one market.

There are other companies that do check Indonesia's overall ability to pay back debt to everyone, everywhere. These are called Moody's, S&P, and Fitch. They are well known around the world. These companies gave Indonesia lower scores: Baa2 from Moody's, and BBB from both S&P and Fitch.

BBB and Baa2 are still good scores. They mean Indonesia can be trusted to pay back its debts. This is real good news. But BBB and Baa2 are far below AAA. Only a few countries in the whole world get AAA from these big, well-known companies. Countries like Germany, Singapore, and Australia get AAA. Indonesia does not.

So when the President put the Chinese AAA score next to the S&P comments, as if they mean the same thing, this creates a wrong picture in people's minds.

There is another problem. Chinese officials themselves have said that companies like Lianhe give too many AAA scores. Many companies and bonds inside China get AAA, even when their real financial risk looks higher than that. Chinese regulators have asked these rating companies to be more careful and honest. So the same AAA score that Indonesia's government uses to sound impressive comes from a system that China's own government does not fully trust.

This does not mean the AAA score means nothing. It has one clear purpose. It helped make Chinese investors feel safe enough to buy Indonesia's Panda Bonds. And it worked well. More people wanted to buy the bonds than Indonesia had to sell, almost two and a half times more. This is a real success for Indonesia's finance team. But helping sell bonds in one market is very different from being “the world's recognition” of Indonesia's economy.

This claim was not said in a small meeting. It was said in front of the whole country, at Indonesia's most important yearly government speech. When a President speaks at this event, people expect clear and honest facts, because this speech shapes how millions of people understand their own country's situation.

Mixing up a small technical score with “the world's approval” is not just a small mistake in words. It can make citizens believe something that is not true. This matters even more right now, because Indonesia is also dealing with a large government budget gap, and people deserve honest information about the country's finances, not just impressive-sounding claims.

This is also not the first time this AAA score has been used this way. Finance Minister, Purbaya Yudhi Sadewa, earlier used the same score to answer critics who said the government spends money too aggressively. But one bond rating from one market cannot really prove or disprove how a whole government manages its money.

None of this means Indonesia did something bad. Borrowing money from China is a smart way to have more choices, especially when the US dollar keeps changing in value. Getting strong interest from investors is a real win, and the people who worked on this deal deserve credit.

The problem is only in how this success was described. Indonesian citizens deserve a simple and correct story. Indonesia has investment-grade status from the big, trusted global companies. That alone is something to be proud of, and it should be said clearly, without adding extra shine from a foreign, narrow, and less trusted rating that sounds bigger than it really is.

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Dr Muhammad Zulfikar Rakhmat serves as Director of the China-Indonesia Desk at CELIOS, and is also affiliated with positions at the Middle East Institute at the National University of Singapore, the London School of Economics’ IDEAS, and Busan University of Foreign Studies.

The views expressed in this article are those of the author.
 

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