JAKARTA (TheInsiderStories – The World Bank is reportedly offering the Indonesian government a loan to fund the country’s light rail transit (LRT) developments, said transportation ministry on July 11. According to the minister Budi Karya Sumadi, the loan offers for four major cities namely Medan, Bandung, Surabaya, and Bali.
The Indonesian government will present its proposal on urban transportation managements during the IMF-World Bank annual meeting that is set to be held in Bali on October of this year.
Last April, during the Spring Meetings of the Boards of Governors of the International Monetary Fund (IMF) and the World Bank Group in Washington DC on April 16-22, Coordinating Minister of Maritime Affairs (CMMA) Luhut Pandjaitan offered blended financing scheme to lure investors in 10 major infrastructure projects in the country.
Some projects that will be offered include waste management facilities, geothermal plant, Kertajati Airport in West Java and all construction of LRT projects in the country. State infrastructure financing company PT Sarana Multi Infrastructure will be involved in development of these projects.
Blended Financing refers to a scheme of financing that would mix the source of funds between the government and commercial financial institutions. The government has made an estimate that such scheme could lure up to US$500 billion worth of investment in the next five years and help close infrastructure financing gap.
Source: Indonesia Finance Ministry
The blended financing scheme was initially proposed by the World Bank. During his visit to Indonesia last year, its President Jim Yong Kim promoted such scheme, which had been implemented in several other countries, but it was totally new in Indonesia.
With the blended financing and the first loss guarantee scheme, financiers will combine funds from donor countries such as the Nordic countries to the bank’s resources to cut down the interest rate on the loan and reduce the risk premium.
This scheme apparently had been successful in attracting fund managers with long-term investment views, including insurance companies to invest in some infrastructure projects.
Sumadi added, that the projects will likely utilize a Government and Business Entity Cooperation scheme upon handling the multiple LRT projects. Currently several companies has lack of liquidity to build the some LRT projects across the nation.
The first LRT in the country build in the Capital City of Jakarta and the South Sumatra Provincial Capital of Palembang to support the 18th Asian Games event in August of this year and as a trigger for the development of the same transportation system in other cities in Indonesia.
Traffic gridlocks are a big problem in big cities like those in Jakarta and other big cities in the country. The present of LRT system is therefore expected to offer alternative transportation system which is effective and efficient for urban people.
The existence of LRT is also expected to become a solution to the problem of traffic congestion in urban areas, as well as to increase the mobility and the income of the people. According to Sumadi, LRT is feasible to be built in a city with a population of at least two million people.
The LRT development in Palembang has reached 78 percent with a total length of 23.4 kilometers across 13 stations. The Palembang LRT project is expected to be finished before the 18th Asian Games kicks off.
In the meantime, there are two LRT lines being developed in Jakarta, namely the Jakarta and its satellite towns of Bogor, Depok, Tengareang and Bekasi LRT and the Jakarta LRT. This projects now has a liquidity problem and doubtfully ready to operate ahead of the Asian Games.
Indonesia has paid a greater attention to speed up its infrastructure development, including toll roads, ports and railways, affordable housing and power plants. Constrained by limited funds, the country has been facing difficulties in realizing its grand ambitious for its massive infrastructure building.