NUSA DUA (TheInsiderStories) - The Islamic Development Bank (IDB) signed Memorandum of Understanding as a commitment to give loans to Indonesia’s state owned PT Sarana Multi Infrastruktur (SMI) up to US$ 1 billion for infrastructure projects.
The six points that are agreed by SMI and IDB are co-financing and co-investment for the scheme public private partnership (PPP) project, direct funding, and the capacity building and technical for SMI in terms of project preparation and sharia business unit to be formed under SMI.
The financing commitments is planned to be allocated for the infrastructure sector by 60 percent. While the remaining ones will be allocated to other sectors. It also parts of IDB commitment to give loans up to $5.2 billion to Indonesia for five years (2016-2020).
Invite SWF Managers in IDB to Invest in Infrastructure
In other parts, the Indonesia government invited the sovereign wealth fund (SWF) managers and IDB member countries to invest their money in infrastructure projects which can bring in benefit for both parties in the long term.
Finance Minister Sri Mulyani Indrawati hoped the institutional investors involve in the Indonesia’s national strategic projects which is consist 225 projects including 35 giga-watts electricity, 52 roads, 9 railways, 17 airports, 13 seaports, 25 special economic zone, dams, and irrigations.
“225 of the projects which is identified as national priorities could not be supported only with the government, then the private sector is very critical,” she said in the 3rd IDB Member Sovereign Investment Forum in Bali.
At the same time, President of IDB, Bandar Hajjar also calls the private sectors to involve infrastructure projects in IDB member countries in related to financial gap fund for infrastructure. The global infrastructure need in 2017 worth $3,3 trillion but the government only able to cover up to US$2,5 trillion. Hence, there is gap around US$800 billion which can filled up by private sectors.
“Meanwhile, the infrastructure financing gap in IDB member countries is between up to $220 billion. This condition need participation from the private sectors,” he added.
In addition, he said the potential private sector fund in IDB member countries is very large which is reflected from 33 of 78 SWF are coming from IDB members worth US$3.3 trillion or equivalent 45% from availability global SWF worth US$7 trillion. In the last five years, 11 new SWF had been established in some of member countries such as Senegal, Tunisia, and Turkey.