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JAKARTA (TheInsiderStories) – Indonesia government is currently offering a broad opportunity to international financial institutions to partner up with local banks, in its quest to form gigantic infrastructure development capital pools in Indonesia.

The Ministry of State-Owned Enterprises (SOEs) continues to push local banks to plunge into infrastructure financing, and cooperate with willing international banks, such as China Development Bank (CDB).

The bank has offered crucial financial support for a great number of infrastructure and industry projects in regions along the routes, boosting local growth and enhancing multilateral cooperation.

In 2015 alone, CDB has released US$3 billion worth of loans to PT Bank Negara Indonesia Tbk (IDX: BBNI), PT Bank Rakyat Indonesia Tbk (IDX: BBRI) and PT Bank Mandiri Tbk (IDX: BMRI), with a tenure of 10 years. It has played a positive role in boosting Indonesia’s market confidence and stabilizing its foreign exchange rate.

As an initial move, CDB has signed a Memorandum of Understanding (MoU) with Bank Mandiri to promote the two banks’ comprehensive relationship for mutual benefits, and for closer relations between the two countries.

Speaking to The Insider Stories on Monday (11/9), Gatot Trihargo, Deputy of Financial Services Business, Survey Services and Consultancy Services of the Ministry of SOE, explained how it is a great opportunity for Indonesian financial institutions to learn from CDB, as the greatest infrastructure bank.

Is there a special mandate for state-owned banks to cooperate with CDB in financing infrastructure?

No. It [The cooperation] is more business-to-business between the local bank and CDB. More likely a corporate action. But we [government] will offer our full support.

Is this cooperation the result of Indonesia not being able to create an infrastructure bank to fulfill its needs in infrastructure finance?

We need a development bank, which in Indonesia does not yet exist. Currently, national banks are required to act as development agents. But what we need is long-term loans, to avoid any mismatch. Actually, third party funds or deposits cannot support infrastructure financing needs.

Why are CDB loan offerings considered more attractive?

They offer loans at remarkably low interest, with affordable installments. They are confidence to give loan in either dollars or rupiah. And Bank Mandiri, BNI and BRI are entrusted to secure infrastructure credit funding sources. It is common for infrastructure banks to have long-term source funds.

In the government’s financial service holding plan, is there any movement to set up an infrastructure bank?

Not specifically. We do really need to find funds that are long-term and cheap to build infrastructure, we want to support the government in its infrastructure aspirations. But if we are each looking for loans, it will be more expensive and can result in increased cost of funds. One of the ideas being floated is that BNI and Mandiri will be appointed as pioneers. We will ask them to lead infrastructure financing efforts, so if there is a bank that wants to join the syndication project they can join up too.

Once the $3 billion loan was secured in 2015, was there any plan to withdraw again from CDB?

We still have a commitment for loans up to $20 billion, but we have not exploited it optimally. We intend to use the funds wisely for development.

What project will be proposed by the government to CDB?

We are still engaged in mapping which projects are feasible enough to be financed. We proposed a tourism sector in North Sulawesi, train tracks, ports, industrial projects and development of a special economic zone. We are looking for rupiah loans, as infrastructure projects mostly rely on rupiah currency.

Writing by Elisa Valenta, Email: elisa.valenta@theinsiderstories.com