T

he government needs to explore funding options to fill the gap between financing demands and available funds for numerous construction projects, bankers and regulators have said.

Alternative funding options, such as the issuance of project-based debt papers, are needed, with the government earlier estimating the total funding needs for infrastructure projects over the next five years at Rp 5.5 quadrillion (US$421.9 billion).

The government is seen to provide less than a quarter of that amount through the state budget, with the remainder intended to be filled through public-private partnerships (PPP) and other funding mechanisms.

Speaking at a seminar on Monday, Bank Mandiri finance and strategy director Kartika '€œTiko'€ Wirjoatmodjo said the government still experienced capacity constraints in the financing of infrastructure projects, so it often turned to banks, which also had limited long-term funds.

In order to solve the mismatch between short-term funding and long-term financing needs in infrastructure, Tiko said banks often sought offshore loans, even though higher external debts left the lenders more exposed to currency risks.

On the other hand, he said the recent trend of declining time deposit rates due to Bank Indonesia'€™s monetary easing had opened opportunities for pension funds and insurance companies, including the Workers Social Security Agency (BPJS Ketenagakerjaan), previously Jamsostek, to invest their funds in more attractive instruments.

With rising demand for attractive investment tools, Tiko said the government could allow companies and construction developers to structure various debt papers to be sold in the capital market and bought by pension funds and insurance companies as big fund holders.

'€œFor instance, limited participation mutual funds [RDPT] based on underlying infrastructure projects will be attractive for insurance companies and pension funds to invest their money,'€ he said.

Tiko added that Bank Mandiri'€™s securities house subsidiary, Mandiri Sekuritas, was currently developing an RDPT scheme with underlying assets based on existing infrastructure projects and would target investors in the capital market.

The Financial Services Authority (OJK) has been encouraging investment managers and securities houses to develop RDPT schemes using infrastructure projects, especially power plants, as underlying assets.

OJK commissioner for capital market supervision Nurhaida said previously investment managers were allowed to develop RDPT for investors who wished to finance independent power producers (IPP) working on renewable energy projects.

According to Energy and Mineral Resources Ministry data, new renewable energy projects require investment of Rp 1.6 quadrillion to Rp 1.7 quadrillion, as the government expects them to contribute 25 percent of the total 35,000 megawatts of new power generating capacity across the country in five years.

On Monday, consultancy firm Deloitte Indonesia published a report called Jakarta Smart City, which highlights the capital'€™s potential for development through improved infrastructure and other aspects with active participation of the government and the public.

At the publication event, Jakarta Governor Basuki '€œAhok'€ Tjahaja Purnama said his administration had become the most open local government in the country thanks to an electronic budget system (e-budgeting) that gave the public insight into public spending, including on infrastructure projects.

'€œWe are collaborating with the Corruption Eradication Commission to promote this e-budgeting program to other regional administrations, so it can be a good template for regency and city development,'€ Ahok said.