Home News Indonesia’s SMI Sees Infrastructure Financing to Grow 20% This Year

Indonesia’s SMI Sees Infrastructure Financing to Grow 20% This Year

Indonesia's SMI Seeks Funding US$ 571M This Year
Indonesian state-owned infrastructure funding company, PT Sarana Multi Infrastruktur (SMI). Photo by The Company

JAKARTA (TheInsiderStories) – State-owned infrastructure financing company PT Sarana Multi Infrastruktur (SMI) intends to expand its financing for regional administrations to give local governments more funding options to finance their infrastructure projects, officials said today (01/24). The company sees infrastructure financing to grow 20 percent this year, higher than the 9 percent of credit bank growth set by Bank Indonesia.

SMI president director Edwin Syahruzad said most local administrations still relied on fund transfers from the central government and locally generated funds to finance their development projects because of a lack of awareness of other funding options.

“Most local administrations in Indonesia still rely heavily on their regional budgets to finance infrastructure projects such as for transportation, drinking water systems, and waste management,” he said during a media gathering in Jakarta.

In 2019, he said, SMI’s outstanding loans for regional administrations totaled Rp4.61 trillion (US$329.28 million). Of this amount, as much as Rp4 trillion has been withdrawn by the regional government. The loan was distributed to 24 local governments. As for the same period, the company has issued 73 offering letters to 54 local governments worth approximately Rp12 trillion.

Some regional infrastructure financed by SMI such as hospitals in Konawe Regency with a total capacity of 219 beds, road construction along 523 kilometers and the construction of bridges along 983 meters. Funds prepared from before at the level of Rp10 billion are now Rp40 billion.

Syahruzad said that his company had encouraged regional governments to be more expansive in developing infrastructure in their regions. Steps to socialize and increase the capacity of local government officials are held regularly. The program is focused on the promotion of innovation in infrastructure financing through regional loans.

The company also provides support in the distribution of the project development facility. This facility is provided in the form of feasibility studies of detailed engineering design to environmental studies. Regional financing is expected to be one of the instruments to accelerate development in addition to the state budget in the provision and improvement of public service facilities.

Syahruzad opined infrastructure continues to play an important role for the next five years in line with President Joko Widodo’s main agenda besides human resource development. Infrastructure funding needs are estimated at Rp6,400 trillion.

“Our financial space is still quite relieved. In the sense that we can still mobilize to continue financing infrastructure. However, it should also be noted that infrastructure demand also depends on economic growth and overall growth of the state budget,” he said.

Syahruzad added the Asian Development Bank (ADB) has approved a $100 million intermediary loan to the government to help kickstart private sector investments in infrastructure projects as several state-owned enterprises (SOEs) in charge of infrastructure development struggle to secure funds for their projects.

“The loan is expected to help mobilize private sector investments to develop and finance much-needed infrastructure projects. Its hopefully help close the infrastructure financing gap in Indonesia and raise the quality and standards of infrastructure projects,” he ended.

US$1=Rp14,000

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