Indonesian Eximbank signed an uncommitted framework agreement on a Bank Line Facility worth US$50 million with the Development Bank of the Central African States (BDEAC)-Photo: TheInsiderStories.

JAKARTA (TheInsiderStories)Indonesian Eximbank signed an uncommitted framework agreement on a Bank Line Facility worth US$50 million with the Development Bank of the Central African States (BDEAC), the agency announced today (8/20). The funds to support infrastructure projects that will use the Indonesian contractor’s services in the Central African Economic and Monetary Community (CEMAC) countries.

CEMAC consists of six countries such as Gabon, Cameroon, the Central African Republic (CAR), Chad, the Republic of the Congo and Equatorial Guinea. Besides providing financing facilities, Indonesian Eximbank can also provide assistance in the form of capacity building and technical assistance. The collaboration was unveiled at the two days 2019′ Indonesia Africa Infrastructure Dialogue (IAID) forum held today and tomorrow in Bali. The forum has a strategic theme of “Connecting for Prosperity” will be attended by 700 delegates from both Indonesia and 53 African countries.

To realize these projects, Indonesian Eximbank is collaborating with state-owned construction developer, PT Wijaya Karya Tbk (IDX: WIKA) and PT Dirgantara Indonesia (PTDI), state aircraft manufacturer.

In this partnership, Indonesian Eximbank is committed to supporting the WIKA’s project of $356 million. The project is the construction of a bulk liquid terminal port in Zanzibar – Tanzania worth $40 million. Then, a $250 million integrated business development project in Senegal. And social housing project worth $66 million in Pantai Gading.

The three infrastructure development projects in Africa are one form of service exports. Going forward, the project’s business value can still increase because the total project value for the port in Zanzibar is $190 million, and the construction of flats in Pantai Gading is worth a total of $200 million.

While with PTDI, the agency signed a Memorandum of Understanding (MoU) which included working capital financing for the company, as well as buyer’s credit facilities for prospective customers of PTDI in the African Region.

The MoU with PTDI is the export of goods which can also be facilitated by the buyer’s credit scheme. The provision of the Buyer’s Credit facility can only be provided by Indonesian Eximbank, with the aim of increasing Indonesia’s exports from the buyer side or demand side. This scheme is a tangible form of the role of Indonesian Eximbank as the ‘fill the market gap’.

The financing facility provided uses the Buyer’s Credit scheme. Buyer’s Credit is an overseas financing facility in the form of working capital and/or investment financing provided by Indonesian Eximbank to overseas buyers to purchase goods and/or services produced in Indonesia. Buyer’s credit is a facility provided by the agency with the aim of increasing Indonesian exports from the demand side.

Indonesian Eximbank as the Ministry of Finance’s Special Mission Vehicles with a mandate to increase national exports took an important role in efforts to increase exports to African countries. This effort also reinforces the position of the agency to play its role in the concept of ‘fill the market gap’, given that these projects are considered to have a high enough risk by the Banking sector in general.

Indonesia, under the leadership of President Joko Widodo, wants to focus more on Africa to forge a strong economic partnership between the world’s biggest archipelagic nation and all 54 African countries. In April 2018, Indonesia launched the first-ever Indonesia-Africa Forum, which not only gave a new shape to the old and strong relations between Indonesia and Africa but also resulted in more than half a billion dollars of business deals in sectors of strategic industries, infrastructure financing, mining, textiles, aircraft maintenance, and trade.

No wonder Widodo’s administration has been consistently allocating a huge budget for infrastructure development since he assumed his post in 2014. For example, Indonesia has allocated Rp415 trillion ($28 billion) for infrastructure projects in 2019, a huge jump from Rp256.1 trillion in 2015.

Indonesia is expected to become the fourth-largest economy in the world by 2050. In order to achieve this, the Indonesian economy must grow sustainably, for which infrastructure development is vital.

Likewise, Africa, which has the second-fastest growing economy in the world after Asia, needs to build more roads, bridges, railway lines, airports, seaports, houses, apartment complexes, office buildings, power plants and water facilities to prosper more in the coming years.

With its 1.32 billion people (2019 estimate), Africa offers many opportunities for Indonesia and its businesspeople. It is also the youngest continent as its present median age is just 19.4 years. Like Indonesia, Africa is very rich in natural resources. This year, the average overall growth of African countries will be 4.3 percent. Many countries in Africa have the potential to grow more than 5 percent in the next five years.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com