National infrastructure bank establishment hampered by limited funds

BADUNG (TheInsiderStories) – The Indonesian government’s plan to establish a national infrastructure bank to finance infrastructure programs is still constrained by the limited funds of the government. The plan could be cancelled altogether should the government failed to allocate enough funding from the State Budget.

The plan to establish the special purpose bank has emerged since 2012 triggered by the absence of long term funding available in banks or market. Three years later, former finance minister Bambang P.S. Brodjonegoro encouraged PT Sarana Multi Infrastruktur (SMI), one of the SOEs, to transform into an national infrastructure bank.

“Currently, the problem of infrastructure bank’s plan is the fund requirement. The government has limited fiscal room to provide the guarantee funds,” said Dody Budi Waluyo, Executive Director of Bank Indonesia’s Economic and Monetary Policy.

Data from Committe for The Acceleration of Provision of Priority Infrastructure (KPPIP) showed the government wants to push development of 225 national strategic project that requires investment of Rp3,203 trillion. Currently, Dody said, alternative financing infrastructure other than infrastructure bank comes from infrastructure bond.

It appears that there is no specific investment products in financial market related to infrastructure.
The Head of Capital Market Supervisory Department of the Financial Services Authority (OJK) Djustini Septiana said in general, there is no constrain to issue bonds but OJK is ready to develop new type of bonds although there are already some products such as limited investment mutual funds (RDPT), asset backed-securites, and Real Estate Investment Trust, which can used to finance infrastructure projects.

Meanwhile, Senior Deputy Governor of BI Mirza Adityaswara stated that the urgency of establishing the infrastructure bank, is being questioned. He argues that SMI along with other SOE’s namely Indonesia Infrastructure Finance (IIF), Penjaminan Infrastruktur Indonesia (PII), and SOE’s banks are already able to disburse credit to infrastructure projects.

“So it is actually between necessary and unnecessary because there are existing infrastructure fundings from banks. The important thing is there is funding,” he said.

Previously, Secretary of the Coordinating Ministry for Economic Affairs Lukita Dinarsyah Tuwo said that the establishment of an infrastructure bank is is not a primary option. The government decided to encourage financing through non-government financing.

“We can use long-term funds such as insurance and pension funds, including the haj funds in the form of sukuk,” he added. (RF)