Govt mulls new scheme to finance projects

JAKARTA. The government may set up a new institution to finance infrastructure development projects stipulated in the Master Plan for the Acceleration and Expansion of Indonesian Economic Development (MP3EI), an official says.

Bank Indonesia Governor Darmin Nasution reported that the government had conducted a feasibility study to find the best way to provide financial sources for the projects and that establishing a new institution for that purpose was among the suggestions made.

“With our credit rating upgraded to investment grade, the options for the sources of funds are very broad. However, we need an instrument to invite and manage those funds,” he told reporters during a press conference after a Cabinet meeting at the State Palace in Jakarta on Wednesday.

He acknowledged that setting up a new institution would take “some time” because it needed strong and clear legal foundations. Thus, he added, if the government wanted to save time, one available option was to optimize the role of the existing institutions: PT Sarana Multi Infrastruktur (SMI) and the Indonesia Infrastructure Fund Facilities (IIFF).

“We haven’t come to a firm decision on which strategy we’ll use. During the [Cabinet] meeting, we only presented the available options. However, the discussion was very deep and productive so I think a decision can be taken in the near future,” Darmin said.

The MP3EI aims to develop six economic corridors in the country. The corridors are Sumatra for energy-related development, Java for industry and services, Kalimantan for mining, Sulawesi and North Maluku for agriculture, forestry and fisheries, Bali and Nusa Tenggara for tourism and food, and Papua and Maluku for natural and human resources.

Considering the broad variety of projects in the MP3EI, the new institution might be formed along the lines of a development bank, like the one Indonesia had in the New Order era, Bank Pembangunan Indonesia (Bapindo), to allow it to cover not only infrastructure projects but other vital long-term projects, such as in the agricultural sector.

Darmin argued that Indonesia was in better shape compared to during the New Order era in terms of its supervision of the financial sector and its compliance with international rules. No matter which option was taken, the country had a big chance to succeed, he continued.

Coordinating Economic Minister Hatta Rajasa said that projects included under the MP3EI required around Rp 4,000 trillion (US$442.72 billion) in investments. Out of that amount, around Rp 1,700 trillion was needed for infrastructure projects, he reported.

“We need institutions with strong capital structure to provide the required funds in a short time,” he said.

He revealed that the government had not prepared a budget to set up a new institution, but that if the funds to execute the projects were needed urgently, he agreed with Darmin that the government would utilize SMI or IIFF. (Rangga D. Fadillah/ The Jakarta Post)

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