Christopher Langner is a markets columnist for Bloomberg Gadfly. He previously covered corporate finance for Bloomberg News, and has written for Reuters/IFR, Forbes, the Wall Street Journal and Mergermarket.

Indonesia may be destroying Chinese fishing vessels in a show of maritime sovereignty but when it comes to investment, its state-controlled enterprises are following the lead of Beijing.

Publicly traded firms that are majority owned by Indonesia's government are doing the heavy lifting when it comes to building infrastructure to boost the Southeast Asian nation's economy, and they're doing it with debt.

Total borrowings of the 28 companies have increased by 73 percent to $29.6 billion since 2012, according to data compiled by Bloomberg:

Borrowing Load
Total debt of 28 publicly traded state-owned companies in Indonesia has increased 73 percent since 2012
Source: Bloomberg

This sudden penchant for debt has boosted the average leverage of these firms -- as measured by net debt to operational earnings -- from zero to 2.45 times in just four years, a pace that should in itself raise alarm.

Into High Gear
A key measure of leverage at Indonesia's state-owned firms has risen sharply in four years
Source: Bloomberg

The reason behind this sudden rise in obligations is investing. State-owned companies are helping to execute a good deal of President Joko Widodo's ambitious infrastructure plans amid central government budget strains.

Build 'Em Up
Indonesia's publicly traded state-owned firms have been investing -- and borrowing -- heavily
Source: Bloomberg

The practice becomes more of a problem because these companies at times depend on payments from the Ministry of Finance to make good on their dues, and those aren't always guaranteed. Earlier this year, changes in the budget allocation to SOEs gave some executives a scare.

Then there's the issue of foreign-currency exposure. It's primarily Indonesia's non-listed SOEs that have been on an offshore borrowing spree and now owe some $29.1 billion in either dollar or euro-denominated notes.

Foreign Trouble
Having sold a lot of dollar- and euro-denominated bonds, Indonesian SOEs now owe more than $29 billion
Source: Bloomberg

That amount's on top of the $29.6 billion listed companies have on their own balance sheets, meaning there are at least $58 billion of dues out there.

Of course, investing in infrastructure is good for the economy and should provide long-term benefits that will pay dividends to shareholders. Funding it primarily with debt should raise concerns, though.

That the rise in these contingent liabilities may not be fully reflected in the government's balance sheet should make creditors of both the sovereign and its companies pause. It could jeopardize Indonesia's investment-grade standing at Moody's and Fitch, and dent the value of its bonds going forward.

As always, investing for the future is good. It's even better when done with transparency and paid for out of operating cash.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Christopher Langner in Singapore at

To contact the editor responsible for this story:
Katrina Nicholas at