14 Indonesia’s Railway Projects Finances with Government SUKUK

Indonesian government plans to build two fast trains until 2024 with total cost Rp63.6 trillion (US$4.54 billion) - Photo by China Railway Corporation

JAKARTA (TheInsiderStories) – 14 railway projects in Java, Sumatra and Sulawesi has financed with the State Sharia Securities (SUKUK) with worth of Rp7.1 trillion (US$489.66 million), said one official in official statement on Wednesday (22/08).

The State SUKUK was launched by the government based on Law Number 19 of 2008 concerning State Sharia Securities, while project financing through State SUKUK issuance has a legal umbrella in the form of Government Regulation Number 56 of 2011 concerning Project Financing through the Issuance of State Sharia Securities .

Indonesian government reported Until July, project financing through SUKUK  worth of Rp22.53 trillion for a number ministries and agencies. The funds consists of 587 projects spread over 34 provinces in seven ministries and institutions.

According to Acting Director Sharia Financing for Ministry of Finance Loto Srinaita Ginting said, the Transportation ministry is the most active in the use of State SUKUK since 2013. In the 2013-2017 period, the ministry has used the funds from the State SUKUK Rp16.71 trillion to build railroads in Java and Sumatra.

Development of railway infrastructure is recognized as a government priority. In the National Railway Master Plan which is targeted to 2020, rail transport capacity is set to reach 600 million passengers a year while freight transport is 60 million tons per year.

Director General of Financing and Risk Management for Finance Minister Luky Alfirman added, SUKUK is part of efforts to strengthen the financing capacity of the State budget. Aside become one of the state financing instruments, he continued, SUKUK issuance also aims to foster the growth and development of sharia financial markets in the country, and develop alternative investment instruments.

Last March, the government has published global SUKUK with a total value of $3 billion on the Singapore Stock Exchange and Nasdaq Dubai. The SUKUK is divided into two series – Series A worth $1.25 billion with tenure of 5 years and Series B worth $1.75 billion with tenure of ten years.

Previously, the finance ministry has issued $1.25 billion five-year green bond on Feb. 23, 2018, which is designed to comply with Sharia Law. This issuance marked Indonesia as the first Asian country to sell a sovereign green bond.

Meanwhile, beside use State budget, the government also prepared 34 projects with a total value of $26 billion under non-budget investment financing scheme also known as PINA, to domestic and foreign investors. Of those projects, eight are considered as mega projects.

Minister of National Development Planning/Head of the National Development Planning Agency, Bambang Brodjonegoro described the PINA as an alternative financing in the development of public infrastructure in Indonesia.

There are currently 19 sectors that can be initiated in public-private partnership scheme with the government of Indonesia, encompassing the sectors of connectivity, urban development, and social development.

The government expects Public Private Partnerships (PPP) and PINA alternative financing scheme will be able to fill the financing gap in the infrastructure development of Indonesia.

The ministry has initiated the formation of the PPP Joint Office as a one-stop service and as a coordinating forum among the PPP stakeholders at the central government level, comprising seven Ministries and government agencies.

The PINA Centre that is currently in the Ministry of National Development Planning has the role of providing information on the progress of projects to investors in the context of realizing an investment climate that can promote investment activities in Indonesia.

In the first half of 2018, the government has issued bonds worth Rp192.6 trillion or equivalent to 46.5 percent of the target in the State Budget of 2018 worth Rp424, 5 billion.

Meanwhile, the outstanding debt of Indonesia reached Rp3,442.64 trillion consisting of rupiah denomination derived from Government Bond Rp2.028.67 trillion and Sharia Securities Rp391 trillion by the end of 2018. As for the foreign exchange denomination Rp799.71 trillion and global SUKUK Rp223.26 trillion.

US$1: Rp14,500

Email: linda.silaen@theinsiderstories.com