The interest of the regional government to issue municipal bond rising after government release the supported policies to them, said the official last week - Photo by President Office

JAKARTA (TheInsiderStories) – The interest of the regional government to issue municipal bond rising after government release the supported policies to them, said the official last week. Four regional governments, Jakarta, Aceh, West and Central Java has , are also interested in issuing municipal bonds.

Chief executive at the Financial Service Agency (FSA), Hoesen, said that West Java, Aceh and Jakarta were preparing for the issuances. While, Central Java is currently discussing the municipal bond with the regional parliament.

He revealed, before run the program, the regional government must form special units that deals with the issuance and manage the debt. Then, they has a duty to have adequate human resources to manage infrastructure project funding from the issuance of regional bonds.

“The local government have started in preparing the capacity of the organization and its people. They have to prepare the whole organization,” the chief executive said.

Beside, the four governors, South Kalimantan also considered to release the municipal bond. According to the deputy governor, Rudy Resnawan, the municipal bond can be an alternative funding, as the regional budget is limited while the funding needs is big enough.

“Its very huge. If we calculated, we still need around Rp20 trillion (US$1.43 billion),” he said last February.

Resnawan targeted that the municipal bond can be issued at least next year. But prior to the execution, provincial government must discuss further with South Kalimantan Regional House of Representatives.

FSA has encouraged regional government to be independent in getting funding sources for infrastructure projects. Last year, the authority released regulation about municipal bond.

With an urgent need of more than $105 billion for development, the government of Indonesia must manage budgets more creatively, in the attempt to find new sources of financing for infrastructure projects. These results from a realization of limited fiscal space.

Recent regulations have been issued to drive the role of regional government to participate more in managing potential. This action can, it is believed, reduce the dependency of regional government on central government for financing regional development.

Technically, regional governments have been allowed to issue bonds for more than a decade now. However, none have ventured forth to attempt to do so because of the complex procedures set up by the central government.

With FSA having recently simplified the procedure of selling bonds in the capital market for alternative funding, the regional administration looks poised to take steps to realize the plan

The agency also issued two other regulations – on green bond procedures to raise money backed by natural resources and on an e-registration system to boost its service efficiency and transparency to stakeholders.

The central government also stated the Non-Government Budget Investment Financing (PINA) scheme is needed for Indonesian to develop infrastructure. This scheme will help reduce the burden on the state budget, which has been limited so far, to encourage development.

Its expected, the involvement of long-term funds in PINA, such as pension funds and life insurance, for the effective management and utilization of infrastructure financing.

Various financial instruments to support the PINA scheme are also being prepared, such as Perpetual Bonds with a very long tenure, which not only supports infrastructure development but also increases interest in the capital market. A number of PINA’ projects, including 15 Waskita toll roads and the Kertajati International Airport, have reached financial close.

US$1: Rp14,000

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