JAKARTA (TheInsiderStories) – The Indonesian government is pushing more private sector, including pension funds, to involve in the infrastructure sector, by investing in the government’s national strategic infrastructure projects.
According to the Financial Services Authority (OJK) rule, pension funds can invest their money in real sector with a maximum of only 10 percent of their total investment portfolio, while the rest is invested in deposits and government bonds.
The government sees around Rp600 trillion potential domestic pension funds to be invested in the infrastructure projects.
For example, two giant national companies that are managing pension funds namely the Social Security Administration Body for Employment, or BPJS Ketenagakerjaan and pension insurance firm PT Taspen have assets under management (AUM) amounted to Rp360 trillion.
“Of the 10 percent, they have invested more in property sector. They are afraid to invest in long-term infrastructure projects,” said the National Development Planning Board (Bappenas) head, Bambang Brodjonegoro at his office.
Pension fund is considered suitable to fund long term infrastructure projects. Therefore, the government will revise the Presidential Regulation No. 3, 2016 to encourage the long-term funds, including foreign pension funds or sovereign wealth funds (SWF) to invest in infrastructure sector.
In addition, the government will also encourage the capital market authority to create new investment products in capital market, beside existing products in order to match infrastructure business needs.
He states that domestic pension fund managers should prefer invest in long term investments like infrastructure projects than short-term investment such as deposits or short-term government bonds. In other countries, he added, SWF managers have no limit to invest in long-term investment.
Some SWF managers from Canada and Netherlands have expressed their interests to invest in infrastructure projects in Indonesia. So far, they are investing their funds in the Indonesian government’s bonds.
Through the planned new regulation, the government will facilitate the SWF managers to look for local partners or investees because the potential global SWF funds in 2017 expected to reach US$7 trillion.
Separately, OJK commissioner for the non-banking financial industry Firdaus Djaelani said, the OJK is ready to support the government’s plan to encourage pension funds to increase their investments in infrastructure projects. He admits that pension funds that have invested in infrastructure projects remain low.
“Maybe they need time to learn as well as measure risks and returns of investing in infrastructure sectors,” he said.
He also said that so far OJK has no plana to raise the limit of pension funds to invest in infrastructure above 10 percent. OJK, he continued, is just trying to give more information to pension fund managers about infrastructure business.
He, however, hopes that in the future, the pension funds can make syndicate financing to infrastructure projects like SWF in developed countries.
The government is hoping that private sector can fund at least 60% of national strategic projects.
Currently, the government has added 55 new projects to national strategic project list, increasing the number of strategic projects to 265 projects with investment needs of up to Rp3,000 trillion