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NEWS UPDATES Asean Affairs         4  July 2011

Indo banks need to focus on infrastructure

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Indonesian business leaders have urged the central bank and the government to change some guidelines that were set during the financial crisis 13 years ago and allow banks to provide large loans for infrastructure projects.

“We are concerned that banks have not been in line with development in the real sector” of infrastructure, Erwin Aksa, chairman of Indonesian Young Entrepreneurs Association (Hipmi), said on Sunday.

Banks have been reluctant to loan for infrastructure projects, which require large amounts of capital, on concerns they may have problems with land acquisition and late repayments. Loans for infrastructure projects accounted for 13 percent, or Rp 33.2 trillion ($3.88 billion), of total loans of Rp 246 trillion in 2010 at Bank Mandiri, the country’s largest bank by assets.

This year, the bank forecasts disbursing Rp 20 trillion in loans for infrastructure, while its total outstanding lending may grow by 20 percent, its president director, Zulkifli Zaini, said in April.

Total bank loans for the infrastructure sector in February were 4.6 percent, or Rp 81 trillion, of Rp 1,773.9 trillion in all loans outstanding, Antara news agency reported, citing Bank Indonesia data.

However, the data also showed that the disbursement of loans for infrastructure was lower than loans committed because some projects had been halted due to land-purchase issues. In 2010, infrastructure loan agreements reached Rp 39.80 trillion, but only Rp 20.78 trillion was disbursed.

Jongkie Sugiarto, president director of Hyundai and deputy chairman of the Indonesian Automotive Industries Association (Gaikindo), said banks needed to focus more on infrastructure instead of just concentrating on consumer financing for items like cars or motorcycles. “How can people use their cars if there is no more space for roads?” he said.


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