For the issuance of ORI011, the Indonesian government aims to raise IDR 20 trillion (USD $1.7 billion) in funds. This target is exactly the same as the target that was set by the government for the ORI010 series. Similar to previous ORI issuances, the ORI011 series has a one-month holding period. This means that investors can sell the bonds on the secondary market after 15 November 2014.

General Director of Debt Management, Robert Pakpahan, is optimistic that the new ORI series will be warmly welcomed by the public as it is a safe investment (government guarantee) and with a coupon rate that is higher than Bank Indonesia’s key interest rate (BI rate) which currently stands at 7.5 percent.

To offer ORI011, the government has 21 sales agents consisting of 18 banks and three securities firms. Sales agents also conduct road shows in 35 cities to promote the issuance, primarily in the eastern region of Indonesia, such as Ambon and Jayapura.

ORI is a financial instrument that is issued specifically for retail investors/individuals. Besides ORI, the government also issued another instruments to attract retail investors i.e. the Retail Sharia Government Bond (Sukuk Negara Ritel, or, Sukri), savings bonds and government securities (Surat Utang Negara, or, SUN) for the domestic market.

ORI is usually issued once a year (but twice in both 2007 and 2008). After 10 issuances it can be stated that ORI series are always warmly welcomed by investors, evidenced by huge demand (the only exception being the ORI005 series).

The number of investors that invest in ORI series is highly volatile, especially the number of new investors. The ORI005 series, issued in 2008, was dumped by many investors due to the high deposit interest at that time and the long tenor (5 years), so that investors prefer to invest in banking instruments. The government then shortened the tenor from five to three years.

In the last two issuances - ORI009 and ORI010 -, ORI proved to be a highly popular investment instrument, evidenced by the high number of new investors reaching 16,107 and 26,824 respectively.

Indonesian Retail Government Bond:

 ORI   Year
   Coupon (%)    Maturity Date
(in trillions)
  Number of
 001   2006         12,05      08-08-2009   IDR 3.28      16,561     16,561
 002   2007          9,28      28-03-2010   IDR 6.233      13,158     10,372
 003   2007          9,40      12-09-2011   IDR 9.367      22,837     16,692
 004   2008          9.50      12-03-2012   IDR 13.455      37,724     26,089
 005   2008         11,45      15-09-2013   IDR 2.71      14,001     10,983
 006   2009          9,35      15-08-2012   IDR 8.54      24,433     14,601
 007   2010          7,95      15-08-2013   IDR 8.0      17,705     10,959
 008   2011          7,30      15-10-2014   IDR 11.0      15,372     10,410
 009   2012          6,25      15-10-2015   IDR 12.68      25,293     16,107
 010   2013          8,50      15-10-2016   IDR 20.2      38,860     26,824
 011   2014          8,50      15-10-2017      

However, when we compare ORI investors with the total number of Indonesians (250 million) or the number of Indonesians that are categorized as middle class (45 million people) then the ratio of ORI investors is very small. This fact reflects that Indonesia’s financial markets are still far from inclusive. With continuously rising per capita income as well as the growing population, retail bonds should become a more effective tool to increase financing.

Based on a report of the Asian Development Bank (ADB)'s Asia Bond Monitor (March 2014), total outstanding ORI was only IDR 43.8 trillion or 4.4 percent of total outstanding debt of Indonesia as of December 2013.

The low number of domestic retail investors is one of the reasons why the Indonesian financial market is highly vulnerable to global shocks. The average foreign ownership of Indonesian bonds stands at 34 percent. If there is global turmoil, then there emerge serious risks of outflows rocking the country’s financial markets, and weakening the rupiah exchange rate as well as yields.

Referring to the issuance of government securities (SUN) in the last two months, foreign investors are still very interested in Indonesian bonds, reflected by high demand during SUN auctions reaching up to 4-7 times being oversubscribed. For example, the Global Sukuk issuance in September 2014 was 6.7 times oversubscribed (sukuk refers to Islamic bonds).

Finance Minister Chatib Basri has repeatedly warned that Indonesia should be aware of the high number of foreign investors in the debt portfolios. On the one hand, the high interest of foreign investors indicates that they are optimistic about the economic conditions in Indonesia. However, on the other hand, this causes vulnerabilities due to the above-mentioned risk of outflows in times of global shocks. For this reason, the government continues efforts to increase the number of domestic investors in Indonesian bonds.

Unfortunately, enhancing popularity of bonds among domestic investors, particularly retail investors, is still blocked by a number of factors most importantly being that Indonesians have few knowledge about investment tools such as bonds. Furthermore retail investors are still highly concentrated in the western part of Indonesia, especially Jakarta (55 percent of the country’s total retail investors). In the eastern part of Indonesia this ratio is only 10 percent.

So far, the government only has four instruments to attract retail investors i.e. ORI, retail sukuk, savings bonds and government securities (SUN).

Of these four instruments, ORI and retail sukuk are the most stable tools. Similar to ORI, retail sukuk is also very attractive as reflected by the increasing number of issuances as well as investors’ appetite. Unfortunately, the foreign-denominated government bonds (SUN) and savings bonds for the domestic market are less attractive. The first foreign-denominated SUN issuance aimed at attracting USD $450 million. However, it only managed to attract USD $190 million (42.2 percent of the target). Meanwhile, the first savings bonds issuance (May 2014), the government absorbed public funds amounting to IDR 2.39 trillion, slightly below the target of IDR 2.5 trillion.