ASEAN KEY DESTINATIONS
Bill to boost infrastructure financing ready for deliberation
Indonesia: Lawmakers are expected to start deliberation of the infrastructure financing bill soon and complete it early next year, as the legislation will be crucial in boosting various construction projects essential to sustaining economic growth.
The government has submitted the bill, known as the Indonesian Infrastructure Financing Agency (LPPI) bill, to the House of Representatives, which will discuss it with the Finance Ministry.
The bill is expected to provide a legal basis for the government’s plan to merge state infrastructure-financing company Sarana Multi Infrastruktur (SMI) and state investment unit the Government Investment Center (PIP), in a move to help expand SMI’s capacity in project lending.
The merger of the two companies will make them into a new “infrastructure bank” with greater financing capacity, as the new firm is expected to have a total capital of Rp 25 trillion (US$1.91 billion), according to Finance Minister Bambang Brodjonegoro.
“With a total equity of Rp 25 trillion, we expect that the company’s financing capacity can be leveraged six times higher, to Rp 150 trillion,” Bambang said on Thursday.
The revised 2015 state budget has allocated Rp 20.3 trillion of capital injections (PMN) to SMI, comprising Rp 2 trillion of fresh funds and Rp 18.3 trillion of PIP’s current idle assets.
According to the government’s plan, the idle assets will be injected into SMI in the second half of the year after the company has completed an evaluation of its assets.
Bambang said the government planned to inject an additional Rp 2 trillion into SMI on top of the merger to boost the firm’s capital to Rp 25 trillion. As of 2014, SMI posted Rp 4.8 trillion in total equity, rising slightly from Rp 4.54 trillion a year earlier.
SMI’s total outstanding financing stood at Rp 4.26 trillion last year, an increase of 38.31 percent from
Rp 3.08 trillion in 2013. The company is expected to book Rp 5 trillion-Rp 6 trillion in financing commitments this year, its president director Emma Sri Martini said.
As one of its sources of funding, the would-be financing agency will issue bonds equal to the level of government bonds, as the company would not be allowed to collect third-party funding directly as banks do.
“Bilateral and multilateral loans from banks and foreign funding may also be used. The company can also get idle funds from other sources, such as the BPJS [Social Security Agency] and haj funds,” Bambang added.
In a bid to boost economic growth, Indonesia needs a total of Rp 5.5 quadrillion in investment for infrastructure projects in the next five years, according to the 2015-2019 National Mid-Term Development Plan (RPJMN) released by the National Development Planning Board (Bappenas).
Fadel Muhammad, the chairman of House Commission XI overseeing finance and planning, said he expected the infrastructure financing bill to be endorsed early next year, adding that the House would urge the agency’s funds to be mainly channeled to regional infrastructure projects.
Emma said the bill was expected to allow the new agency to provide financing for regional administrations’ infrastructure and social projects, such as traditional markets and hospitals.
“The future agency will focus on public service rather than seeking profit like other state-owned enterprises. It will certainly help finance much-needed basic infrastructure,” Emma said.
The president director of state-owned Bank Mandiri, Budi Gunadi Sadikin, concurred that the future financing agency could fill the financing gap for infrastructure projects deemed unfeasible by commercial banks.
“For example, the agency can finance those parts of a toll road project that are not feasible for state or private banks,” Budi said.
In order to support the growth of the future financing agency, Budi said Bank Mandiri had discussed with SMI several infrastructure projects that could be financed through partnerships such as syndicated loans. Last year, Bank Mandiri posted Rp 80 trillion in outstanding infrastructure loans.
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