Indonesia’s massive infrastructure development is hampered by the lack of the domestic financing sources.
By
·3 minutes read
JAKARTA, KOMPAS – Indonesia’s massive infrastructure development is hampered by the lack of the domestic financing sources. The State Budget (APBN) is able to provide only about 40 percent of the total funds needed for infrastructure development. Domestic financing sources exist, but they have not been utilized optimally.
This financing issue was raised during the CEO Lunch Forum titled "Indonesia’s Infrastructure and Economic Growth in the Next Five Years", held jointly on Tuesday by Kompas daily and PT Perusahaan Listrik Negara (PLN) in Jakarta. The event, which was opened by Kompas Gramedia CEO Lilik Oetama, was attended by PLN president director Sofyan Basir, the PT Bank Negara Indonesia Tbk president director Achmad Baiquni, PT Wijaya Karya (Persero) Tbk president director Bintang Perbowo, the PT Indonesia Asahan Aluminum (Persero) president director Budi Gunadi Sadikin, PT Sarana Multi Infrastruktur (SMI/Persero) financing and investment director Edwin Syahruzad, and Association of Industrial Estates chairman Sanny Iskandar.
Baiquni said that the funding needs for the 2015-2019 infrastructure programs reached Rp 4.756 quadrillion, or about Rp 951 trillion per year. The problem was, he said, the state budget allocation for infrastructure development was limited, at about Rp 410 trillion per year. Thus, the government needed to find other funding sources to cover the shortfall.
"State-owned enterprises can only provide Rp 2.817 quadrillion toward infrastructure development, or about 58 percent of total budgetary needs. Of this, at least 50 percent will come from banks. In fact, the banks also have their limits, because they will use their funds not only to finance infrastructure, but also their microcredit programs," said Baiquni.
Meanwhile, SMI’s Edwin said local governments needed to utilize regional budgets to finance infrastructure development. SMI could help facilitate local governments to team up with business entities in developing profitable infrastructure projects, such as water treatment facilities. This scheme had been implemented well in a number of regencies in East Java, he said.
State-owned enterprises can only provide Rp 2.817 quadrillion toward infrastructure development, or about 58 percent of total budgetary needs.
Indonesia Asahan Aluminum president Budi said the government had long faced financial limitations in the infrastructure projects. According to him, bank liquidity was not reliable enough to cover the funding gap. The government was currently focusing more on physical infrastructure development and gave little attention on financial infrastructure.
"The financial infrastructure must also be developed. There are four types of financial markets that need to be strengthened, namely the money market, bond market, equity market, and securities market. All need more attention. Regulations and incentives are needed to strengthen financial infrastructure," Budi said.
Several strategies
Sofyan said that in order to be able to finance the 35,000-megawatt power plant project, which would cost at least Rp 1.2 quadrillion, PLN had implemented a number of strategies that included asset revaluation and securitization. PLN\'s debt capacity had risen by more than Rp 1 quadrillion through revaluating its assets.
"From the asset revaluation in 2015, PLN\'s assets increased significantly to Rp 1.2 quadrillion from Rp 539 trillion in 2014," he said, adding that it had carried out asset securitization by using power purchase agreements as collateral for banks. In using this alternative, PLN did not need to pledge its fixed assets, such as power plants, structural property and land, to raise loans.
Meanwhile, in order to further strengthen its capacity to finance infrastructure projects, Wijaya Karya planned to issue global rupiah bonds soon, Bintang said. Wijaya Karya had been forced to seek sources of funding abroad because of limited domestic funding sources.
Sanny added that accelerating infrastructure development required the support of local governments, especially in terms of ease of licensing and land acquisitions.