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Jakarta Post

Japan pledges support for Indonesian infrastructure development

Farida Susanty (The Jakarta Post)
Jakarta
Fri, October 21, 2016

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Japan pledges support for Indonesian infrastructure development Japanese Prime Minister Shinzo Abe (left) speaks with French President Francois Hollande (center) and Indonesian President Joko Widodo (right) as they take part in the "Outreach Session" family photo with world leaders at the G7 Summit in Shima in Mie prefecture on May 27, 2016. (AFP/Jim Watson)

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fforts to boost infrastructure development will get another push after Japan Bank for International Cooperation (JBIC) announced its commitment to provide Southeast Asia’s largest economy with up to US$3.7 billion in loans this year.

The Japanese public financial institution said it would seek opportunities to fund major infrastructure projects in Indonesia, such as the construction of power plants, railways and toll roads, under the public private partnership (PPP) scheme.

“The [source of ] funding for [Indonesian] infrastructure development has shifted from government bonds to the PPP scheme or funding without government guarantee,” JBIC CEO Tadashi Maeda said on Thursday, citing Indonesia’s budget deficit threshold of 3 percent as a part of the reason.

The bank signed on Thursday a loan agreement with state electricity firm PLN to provide $310 million in loans from JBIC-led syndicated banks to finance the construction of PLN’s 800-megawatt (MW) gas and steam-turbine power plant in Tanjung Priok, Jakarta, expected to be completed by 2019.

The loan will mature in 15 years and cover 70 percent of funds needed to run the $437 million project.

The power plant itself is the bank’s second project with PLN funded without the government’s guarantee.

The other project was the construction of a 1x315 MW steam-turbine power plant in Lontar, Banten, which broke ground in June.

JBIC stated that it would also eye funding for the construction of a 2x800 MW coal-based power plant in West Java, one of the country’s biggest power plant projects.

“We might be involved in the funding [of the project],” he said.

JBIC will also coordinate with state infrastructure financing firm Sarana Multi Infrastruktur (SMI) and the National Development Planning Agency (Bappenas) to look for other potential projects to be funded, he said.

Bappenas itself has a list of various infrastructure projects funded under the PPP scheme, including the Lampung water supply project worth Rp 900 billion ($69.2 million) and the Manado-Bitung toll road in North Sulawesi worth Rp 5.1 trillion.

The government estimates it will need Rp 4.7 quadrillion to finance various infrastructure projects for the next few years. It, however, could only cover 40 percent of the funding from the state budget, providing room for private sector participation to fill in the gap.

JBIC revealed that on average, bank budget allocation for Indonesian infrastructure development reached up to $2 billion annually. The realization of funding from JBIC in the last five years has hit $8 billion.

The Finance Ministry’s Fiscal Policy Office (BKF) head Suahasil Nazara urged government institutions to follow up JBIC’s commitment by offering potential projects to be funded.

“Indonesia’s cooperation with JBIC is important for infrastructure development, as they said they would not just focus on physical infrastructure but also social infrastructure,” he said.

 

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