INFRASTRUCTURE FINANCE
The government is working with key public and private institutions to drive sustainable investments in infrastructure, but better promotion of the country is needed to drive investment even more.
IIGF is a state-owned entity under the Ministry of Finance whose mandate is to be a go-between for government fiscal policy in infrastructure. There are four mandates we have to abide by in line with the Ministry of Finance's objectives. For example, we provide a form of sovereign guarantee, which the Ministry of Finance was previously responsible for undertaking. Now, it can do it directly or indirectly through us. Second, we assess the appraisal for projects that have been given guarantees and do the risk and claim management assessments for any failed projects. Third, we are a risk manager for the government, whether the project is guaranteed by the government or IIGF. The objective is to minimize risk. Every three months, we inform the Ministry of Finance about the risk potential. Finally, we are mandated to accelerate infrastructure development through the PPP office and make the state budget more credible so the government can allocate funds for more important projects, while infrastructure can be done with private participation.
In 2017, there was a great deal of infrastructure development. Of the sectors that received this kind of investment, the majority went to transportation. In terms of our current portfolio, transportation still dominates our operations. Toll roads, ports, and airports are all major components of our portfolio, but the most effective sector in terms of attracting private investment has been toll roads. From a regulatory point of view, airports and ports are also beginning to attract private investment, though the readiness of projects in these areas is not as developed as projects in the toll road sector. State-owned enterprises (SOEs) are driving a great deal of the growth and working to invite private players. In parallel to this, the government is working to develop airports and ports that they are structuring and preparing as PPPs. Fundraising, for the time being, has not been an issue for us, as we still have enough room to leverage. Getting funding is much easier than the speed of project development and completion.
Our first partnership was with Indonesia Infrastructure Finance (IIF) in 2016, which was promoted by then-Minister of Finance, Bambang P.S. Brodjonegoro. IIF supports us by jointly investing in good infrastructure projects throughout the country. The reason for the partnership was that at the time, the government was strongly supporting cooperatives. In Indonesia, there are three economic drivers or institutions: first, the government and other SOEs; second, the private sector; and third, the cooperatives. Even the country's constitution states that the driver of Indonesia's economy should be cooperatives, but unfortunately, they are not developing compared to the public and private sectors. When forming our partnership with IIF, our shareholder was actually a cooperative, KOPELINDO. Bulog is the SOE for the food and logistics sectors, and the idea was to find a way for a cooperative to enter infrastructure. Kopel Infrastructure was thus established as a subsidiary of KOPELINDO. Then, we started looking for projects and funding through IIF and banks to get into infrastructure.
PINA is an institution for equity financing because when it comes to infrastructure, it is not only about loans but equity financing as well. The investment injection from the government is typically supported by the state budget toward SOEs in terms of equity. Currently, the political will is not there to give SOEs equity. It is not that we do not favor SOEs, simply that we want to cultivate alternative financing. This trend is visible around the world. There is approximately USD200 billion of untapped alternative financing globally, and these sources of financing are also contemplating investing in emerging market countries, including Indonesia. We have been traveling around the world to countries such as Australia, which is keen to enter the Southeast Asian market. We are also developing an Indonesian desk, though thus far, there has been a lack of global understanding about investments in Indonesia, partially because we are not promoting Indonesia well enough.
INFRASTRUCTURE FINANCE
TABLE OF CONTENTS
Interview
Dr. Bambang Brodjonegoro, Minister , National Development Planning (Bappenas)
TBY talks to Dr. Bambang Brodjonegoro, Minister of National Development Planning (Bappenas), on acquiring financing for infrastructure projects and boosting private sector involvement in the country.
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Thomas Trikasih Lembong, Chairman, Investment Coordinating Board (BKPM)
Thomas Trikasih Lembong is the Chairman of BKPM. He was a former Minister of Trade of Indonesia from 2015-2016. Prior his appointment in the cabinet, he had a long professional career. He was a Co-Founder, Chief Executive Officer, Managing Partner, and Partner at Quvat Management Pte Ltd and also served as President Commissioner at PT Graha Layar Prima Tbk (BlitzMegaplex) since 2012. He was previously employed with Principia Management Group and the Equity Division of Morgan Stanley (Singapore) Pte. Ltd, among others. He received a bachelor's degree in architecture and urban design from Harvard. He also was elected Young Global Leader by the World Economic Forum in 2008.
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Tevita Lavemaau, Former Minister of Finance and National Planning , Tonga
TBY talks to Tevita Lavemaau, Former Minister of Finance and National Planning of Tonga, on the effect of climate change on the country, its work to combat inequality, and further areas of cooperation with Indonesia.
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Dr. Tito Sulistio, President Director, Indonesia Stock Exchange (IDX)
TBY talks to Dr. Tito Sulistio, President Director of Indonesia Stock Exchange (IDX), on the strong performance of the capital markets, its goals to increase the number of listed companies, and the growing importance of digital innovation.
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Amien Sunaryadi, Chairman, Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas)
TBY talks to Amien Sunaryadi, Chairman of Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas), on preparing new block offerings, attracting greater investment into the sector, and pushing for exploration.
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Ronald Walla, President Director, PT Wismilak Inti Makmur
TBY talks to Ronald Walla, President Director of PT Wismilak Inti Makmur, on offering the public a more relevant value proposition, strengthening the ideology of Indonesia's founding fathers, and forging bigger profit margins.
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Teddy Tjokrosaputro, President Director, PT Rimo International Lestari (RIMO)
TBY talks to Teddy Tjokrosaputro, President Director of PT Rimo International Lestari (RIMO), on stepping back forcefully from the brink, using affordable housing as a springboard, and laying the groundwork for the country's future.
read articleReview
In the House
As strong economic growth, an optimistic political outlook, and a partially successful tax amnesty to repatriate offshore wealth continue to drive up housing prices in Indonesia's major urban centers, demand for new housing and shares in developers plummeted in 2017.
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