B

ank Mandiri, the nation’s largest bank by assets, will disburse Rp 875 billion (US$66.5 million) in loans to help accelerate the development of the western section of the landmark Palapa Ring fiber optic network, which will wire the country with faster internet.

The section encapsulates the Sumatra area, mainly the Riau and Riau Islands regions, as 2,000 kilometers of fiber optic cables will be laid out in that region. The project’s western, central and eastern sections will cover 11,000 km spanning the entire archipelago.

Mandiri’s president director, Kartika Wiroatmodjo, noted at the credit signing that Mandiri’s investment loan to project managers PT Palapa Ring Barat would last around eight years, with a grace period of two years, and that it would be mainly used to fund the development of a fiber optic network in five locations in the Riau Islands region.

“With this loan, we hope the telecommunications sector strengthens and develops further so that this country’s network and human resources becomes more competitive and serves as crucial developers to our growth,” he said on Monday.

Apart from the investment loans, Mandiri’s financial assistance will also come in the form of a non-cash loan such as a domestic credit letter (LC/SKBDN) and a treasury line to help smooth the procurement of materials and equipment to carry out the project.

The Palapa Ring undersea cable project is the first government to business cooperation scheme within the telecommunications industry, and is targeted to expand national broadband service availability to all regions, as well as to help reduce usage costs.

The western section will cost Rp 1.3 trillion and the entire project is expected to be completely operational by 2019, decades after the plan was initially hatched before the new millennium under the initial name of Nusantara 21.

Communications and Information Minister Rudiantara says that with the help of Mandiri’s loan, the nation is one step closer to a reliable and integrated nationwide telecommunications network.

“Hopefully this new development also helps push the use of new online tools such as e-government applications for regional governments,” he added.

The western section will be developed by PT Mora Telekom Indonesia (Moratelindo), which has also acquired the tender to develop the eastern section of the Palapa Ring project.

The central section of the project, meanwhile, will be developed by PT Len Telekomunikasi Indonesia and will involve laying down 2,700 km of cable in the Kalimantan, Sulawesi and North Maluku regions. Part of the funding for the central section will come from the Indonesia Infrastructure Finance (IIF).

IIF is seeking as much as Rp 2 trillion from bond issuances to help finance the Rp 1.3 trillion needed to develop the central section, along with a number of other infrastructure projects it plans to fund.

Meanwhile, the eastern section was won by a consortium of Moratelindo IBS and Smart Telecom, with investment of around Rp 5 trillion.

Meanwhile, Moratelindo president director Galumbang Menak Simanjuntak said that while Rudiantara had pushed for the Palapa Ring’s western section to be operational by the first quarter of 2017, he said that it might be more plausible if they were to commence it by the second quarter, as laying down the fiber optic infrastructure within the Riau Islands chain would take more time than previously thought.