Finance Minister Agus Martowardojo on Monday officially launched a non-bank finance company specifically tailored to support the development of infrastructure projects in Indonesia.

The new company, PT Indonesia Infrastructure Finance (IIF), was jointly established by the Indonesian government through PT (Persero) Sarana Multi Infrastruktur (SMI), Asia Development Bank (ADB), International Finance Corporation (IFC) and German investment corporation (DEG).

The company has received an initial sum of Rp 1.6 trillion (US$179.2 million) from its founders.

SMI would provide Rp 400 billion, ADB Rp 400 billion, IFC Rp 200 billion and DEG Rp 200 billion.

Speaking at the launch, Agus said in addition to contributions made by its founders, the IIF would also receive loans from the World Bank and ADB to strengthen its financing capacity.

The two financial institutions had committed to providing Rp 1 trillion each to the IIF, which was established upon a recommendation made during the 2005 Infrastructure Summit, Agus said.

Agus said that if the new financing body were able to provide its services as expected, its role
would be quite significant in
helping the government achieve an economic growth target of 7 percent in 2014.

IIF chief commissioner Bambang Subianto said the launching of the IIF was a historic event for infrastructure in Indonesia.

“The IIF will accelerate private sector participation in infrastructure development, with its unique combination of investment and advisory roles,” he said.

In spite of the global crisis, the Indonesian economy had continued to grow at an average rate of 5 percent per year since 2008, he said. However, he also said Indonesia’s future growth could be hampered by a lack of infrastructure development.

“So, we should build more infrastructure facilities to eliminate bottlenecks that could constrain economic growth and disrupt Indonesia’s development,” he said.

Meanwhile IIF president director Taswin Zakaria said that IIF was expecting to fill a significant gap in the financing of infrastructure development.

“We will play a key role as a dedicated, commercially oriented entity, providing long-term
financing to a broad range of infrastructure projects,” he said, mentioning that the IIF would also maintain credit discipline to secure profits.

Meanwhile, Adam Sachs, the International Finance Corporation country manager for Indonesia and Malaysia, said the IFC was committed to supporting infrastructure development in Indonesia, including for power, transport, water and sanitation facilities.

“We’ve heard from the government repeatedly that billions of dollars are needed for investment over the next five to 10 years, to enable Indonesia to achieve its targeted growth rate, and also to achieve the growth rate with equity so that many more Indonesians can benefit from the growth. So, it’s a big need,” he told The Jakarta Post.

Besides providing funds through the newly established company, the IFC would also invest directly in a number of infrastructure projects, Sachs said.

He said that IFC was also supporting the infrastructure development by providing advisory
programs.

“We are currently advising state electricity company PLN on the development of a large power plant in Central Java.

With a mixed capability in providing both consulting services and long-term investment, IFC expected not only as an investor but also as a partner in the infrastructure development in Indonesia. (ebf)