Government to set up infrastructure fund

Alfian, The Jakarta Post, Jakarta | Fri, 11/28/2008 10:50 AM  

In a move expected to stimulate economic growth, the government will set up an institution to manage a pool of funds to support the financing of infrastructure projects, the National Planning Board (Bappenas) said Thursday. 

The funds will come from the government and donors, Bappenas deputy for infrastructure development, Dedy Supriadi Priatna, said. 

"We are calling it the infrastructure fund. It will be launched in February and will begin operating in April next year," Dedy said during a seminar titled "Solution for Power Plant Project Financing". 

Dedy said the government would work with multinational donors such as the World Bank, the Asian Development Bank (ADB) and the Japan Bank for International Cooperation. 

"So far, about US$600 million in funds has been gathered. The government is contributing about Rp 1 trillion ($82.65 million). We expect to own between 15 and 20 percent of the company," Dedy said. 

Although the amount pooled to date is not considered enough to finance infrastructure, the government expects more funds to be generated once the institution is operational, he said. 

The function of the institution will be to support investors wishing to engage in infrastructure projects, particularly those investors who fail to secure bank loans after winning a project. 

"Project winners often fail to get bank loans because of the lack of funds. Most banks require loan applicants to put up at least 30 percent for their proposed projects. Most infrastructure businesspeople here have only about 10 percent of the equity," Dedy said. 

"We hope the infrastructure fund will help them in this regard." 

The government estimates about US$65 billion will be needed in new infrastructure investment in the next three years. With government funding limited, the private sector is expected to play a crucial role. 

State Minister for State Enterprises Sofyan A. Djalil has said state companies will push ahead with their infrastructure projects to help keep the economy running next year. 

The lack of infrastructure development in Indonesia is frequently cited by investors as being detrimental to economic growth. New infrastructure projects such as roads, power stations and telecommunications networks are expected to help generate greater economic activity and growth. 

Meanwhile, the ADB confirmed it is helping the government to improve the nation's infrastructure. 

In a statement released Thursday, the agency said it was providing an additional $280 million loan to support reforms in Indonesia's infrastructure sector. 

It said the loan would be used to fund programs seeking to encourage private sector participation and help improve the investment climate.