Coordinating Minister for Maritime Affairs Luhut Pandjaitan briefs the press on his recent visit to Japan (Image credit : Coordinating Ministry for Maritime Affairs)

JAKARTA (TheInsiderStories) – Indonesia and Japan Bank for International Cooperation (JBIC) looks to explore the establishment of a sovereign wealth fund (SWF) as an alternative financing method for infrastructure development or investment, officials said on Monday (12/02). The Japanese government-owned JBIC is a policy-based financial that supports enterprises’ development overseas.

Coordinating Minister for Maritime and Investment Affairs Luhut Binsar Pandjaitan said JBIC was very interested in Indonesia’s plans to downstream the nickel mining sector which is the raw material for electric vehicle batteries. Other projects their interest are green energy and hydropower in Kalimantan and Papua.

The minister claimed not to be able to mention the number of cooperation with JBIC going forward. But he estimates that it will reach up to US$60 billion in the SWF form.

“They are very interested in that and say this is a great step. It will make a new change. Because the world is headed to green. I think the numbers are very large but don’t know the exact numbers yet,” he told reporters.

Join with Pandjaitan in the meeting were finance minister Sri Mulyani Indrawati and state-owned enterprises minister Erick Thohir. While JBIC was represented by its governor Tadashi Maeda and his entourage.

Indrawati said at the meeting, JBIC discussed various possibilities for cooperation. Japan, the minister said, was very interested in projects in Indonesia and the funding in them.

“Because JBIC now has flexibility and ideas. They are interested in Indonesia’s initiative to create various kinds of funding that can invest here,” he said.

They see that Indonesia is now in the process of making infrastructure funding. By forming such funding, she continued, JBIC was interested in participating in the form of ownership or equity financing.

The targeted sectors, the minister revealed, included downstream of the mine. The reason is that Indonesia will be downstream from mining projects, especially nickel which have the potential to become an electric battery producer as they have invested in various countries.

They are also interested in investing in the housing sector and building facilities such as Mass Rapid Transit so that later development programs in the housing sector can be combined with the development of cities in Indonesia, Indrawati adds.

“That means it’s good because it doesn’t increase our debt,” the minister ended.

In addition to Japan, Indonesia also plans to establish SWF with United Arab Emirates (UAE) which will be a pooling of investment from various countries of up to US$10 billion. The fund can be used to finance infrastructure projects in Southeast Asia’s biggest economy.

“As a result of discussions with the Abu Dhabi Investment Authority (ADIA), Minister of Energy, CEO Mubadala and several high-ranking officials in Abu Dhabi, we plan to establish sovereign wealth funds. We will study the proposal soon and I hope that the decision will not take long,” Pandjaitan said in a written statement two months ago.

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