A

SEAN member states will launch an infrastructure fund later this year to finance infrastructure projects in the region.

The acting head of the Indonesian Finance Ministry’s fiscal policy department, Bambang Brodjonegoro, said Thursday that the US$450 to $480 million infrastructure fund would be launched in September this year, with Indonesia contributing $120 million, the second-largest amount.

“We need leverage to fund infrastructure projects. Indonesia could obtain higher funding for projects than what we contribute,” he said on the sidelines of the 15th ASEAN Finance Ministers’ Meeting at the Laguna Hotel in Nusa Dua, Bali.

Indonesia is gearing up for intensive campaigning to promote infrastructure projects this year to solve bottlenecks hampering economic acceleration in Southeast Asia’s biggest economy.

The National Development Planning Ministry said Rp 1,923.7 trillion was needed to fund medium-term infrastructure projects up to 2014 to support President Susilo Bambang Yudhoyono’s economic master plan to grow the economy by between 7 and 8 percent per year up to 2025 so the country could join the world’s 10 largest economies.

“The formation of the [infrastructure fund] body will be done in September. All ASEAN states have agreed and contributed to the formation of the fund and they agreed that this is an important issue for the region,” Bambang said, adding that the Asian Development Bank (ADB) would also contribute to the fund. Malaysia is the biggest contributor with $150 million, followed by Indonesia and the ADB, whose contribution was not specified, Bambang added. “Each infrastructure project will be co-financed by the ADB and ASEAN. Additional contributions are also open for all contributing participants.”

ASEAN is also gearing up to pool other funds for disaster insurance through a “catastrophe bond”, but talks have not been finalized at the informal level as the model lacked a clear structure, Bambang said.

“Indonesia took the initiative to offer the establishment of the disaster fund. China has expressed interest in contributing to the fund because it is prone to disasters. There have been ideas, but it will take extra work to conduct assessments and to actually operate the fund,” he said, adding that he expected the fund to be established by year-end.

ASEAN states also expressed interested in the idea, Bambang said, with discussions now revolving around two options: Strengthening existing insurance systems or forming a new catastrophe bond.

The funds pooled by ASEAN states plus China would be used to buy bonds to leverage the amount of funds, and each country involved in the scheme could take out a certain amount of funds at times of disaster, Bambang explained.

The World Bank recently said Indonesia “should do more than what it is currently doing” to prevent
losses in the event of a disaster, adding that a disaster insurance policy for the country would help reduce the economic costs of a major catastrophe.

Indonesia, which experienced one of the largest recorded tsunamis and earthquakes in 2004 in Aceh and is among the most disaster-prone countries in the world, only allocated Rp 4 trillion from this year’s state budget for the disaster management fund.

—JP/ Esther Samboh