Guarantee fund to go into effect this year

Benget Besalicto Tnb., THE JAKARTA POST, JAKARTA | Mon, 02/23/2009 10:53 AM  

The government will start operating the infrastructure guarantee fund this year with an initial fund of Rp 1 trillion allocated from the 2009 state budget, a senior official said Saturday. 

“We’ve finalized the draft of the regulation on the guarantee fund; now we’re waiting for President to sign it,” Bambang Susantono, infrastructure deputy to the coordinating minister for the economy, told The Jakarta Post. 

“I think we can start in the next few months.” 

He added the guarantee was “necessary to attract investors in developing infrastructure projects”. 

It was also important, he went on, to avoid any cancellation of infrastructure development, which is badly needed by Indonesia to accelerate economic growth and improve competitiveness at the international level, which is on a decline. 

He said the government regulation would rule what kind of infrastructure projects need to be guaranteed if there was any policy change made by governments. 

In the case of investors canceling projects due to policy changes on part of the government, the government may be required to pay financial compensation to the investors. 

Such stipulations are detailed in the upcoming government regulation. 

All of the guarantee fund will be used to guarantee infrastructure projects under the public private partnership (PPP) schemes for the next five to 10 years. 

“The existence of the fund will only be aimed at guaranteeing that the next governments will not make any changes to the agreed contracts already signed by previous governments,” Bambang said. 

But he added he could not yet disclose what projects would be guaranteed and how much each of them would be guaranteed for. 

“We’re waiting for the government regulation to be approved,” he explained. 

He also said part of the guarantee fund would be allocated from the state budget, while the rest would be in loans sourced from the Asian Development Bank (ADB) and the World Bank. 

The guarantee fund will differ from the planned infrastructure fund, which is also set to be established by the government soon to facilitate the financing of infrastructure projects. 

Due to the frequent shortages of funds for infrastructure development, the government recently announced the planned establishment of the Indonesia Infrastructure Fund Facility (IIFF), which could take place as early as March. 

This institution will be charged with raising funds to finance infrastructure projects under the public private partnership mechanism.