Minister of Coordinating Maritime Affairs Luhut Pandjaitan (center) during World Bank-IMF Meeting preparation. (Photo by: Ministry of Coordinating Maritime Affairs)

JAKARTA (TheInsiderStories) – The Government of Indonesia will offer blended financing scheme to lure investors in 10 major infrastructure projects in the country during the Spring Meetings of the Boards of Governors of the International Monetary Fund (IMF) and the World Bank Group in Washington DC on April 16-22, a senior minister said.

Coordinating Minister of Maritime Affairs Luhut Pandjaitan told reporters on Monday (03/04) that some projects that will be offered include development of waste management facilities, geothermal plant, Kertajati Airport in West Java and all construction of Light Rail Transit (LRT) in the country. State infrastructure financing company PT Sarana Multi Infrastructure will be involved in development of these projects.

Blended Financing refers to a scheme of financing that would mix the source of funds between the government and commercial financial institutions. The government has made an estimate that such scheme could lure up to US$500 billion worth of investment in the next five years and help close infrastructure financing gap.

Currently the ministry is working on the work papers on the investment packages for the offered projects. Pandjaitan will be accompanied by Finance Minister Sri Mulyani Indrawati, Bank Indonesia‘s governor Agus Martowardojo to attend a forum held by the World Economic Forum in Washington.

“We are more prepared now. We provide clarity that we [the government] will partly fund the projects. The scheme is called blended finance on SDGs 20,” he said.
The minister added that there are some other projects that have been signed by investors to participate during the 2015 Paris climate agreement, which was agreement within the United Nations Framework Convention on Climate Change, where a number of projects dealing with greenhouse gas emissions mitigation, adaptation and finance, were signed.

Source: Indonesia Finance Ministry

Indonesia has paid a greater attention to speed up its infrastructure development, including toll roads, ports and railways, affordable housing and power plants.

Constrained by limited funds, the country has been facing difficulties in realizing its grand ambitious for its massive infrastructure building. As the investment need exceed the nation’s state budget capabilities, the government has made various innovations and breakthrough to lure investors to help fund the projects.

The blended financing scheme was initially proposed by the World Bank. During his visit to Indonesia last year, its President Jim Yong Kim promoted such scheme, which had been implemented in several other countries, but it was totally new in Indonesia.

With the “blended financing” and the “first loss guarantee,” scheme, financiers will combine funds from donor countries such as the Nordic countries to the bank’s resources to cut down the interest rate on the loan and reduce the risk premium.

This scheme apparently had been successful in attracting fund managers with long-term investment views, including insurance companies to invest in some infrastructure projects.

Writing by Elisa Valenta, Email: elisa.valenta@theinsiderstories.com

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