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We want Indonesia’s big infrastructure projects: AIIB

Luky Eko Wuryanto (Courtesy of AIIB)As one of its cofounders and its eighth-biggest donor with US$672

Satria Sambijantoro (The Jakarta Post)
Mon, October 31, 2016

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We want Indonesia’s big infrastructure projects: AIIB



Luky Eko Wuryanto (Courtesy of AIIB)

As one of its cofounders and its eighth-biggest donor with US$672.1 million in investment over five years, Indonesia has a big stake in the China-led Asian Infrastructure Investment Bank (AIIB), which is seen as a serious rival to the World Bank and the Asian Development Bank (ADB). The Jakarta Post’s Satria Sambijantoro recently talked in Beijing with Luky Eko Wuryanto, AIIB’s vice president, chief administration officer and the highest-ranking Indonesian on the bank’s management board, about the vision of his organization and infrastructure projects in Indonesia that are in the AIIB’s sights. The following are excerpts from the interview.

Question: What kind of multilateral financial institution does the AIIB want to become?

Answer: This is a 21st century multilateral institution that wants to benchmark the best practices. Our idea is to create a “lean and clean” organization. By saying lean, we want to be efficient.

The World Bank, for example, is considered inefficient because it has 16,000 staff around the world with a decentralized approach in decision making and all with high international salary standards. It’s very costly.

We want to hire only the best, most competent staff. One staff member is expected to have diverse skills from human resources to economic analysis, or both excellent hard and soft skills, so we can apply a multitasking approach in carrying out work.

On our clean approach, we are a new institution and thus we are starting in a clean state without any baggage at all. Still, we are aware of how things work at the Asian Development Bank [ADB], the World Bank, the European Bank for Reconstruction and Development [EBRD], and we are learning from them. There are certain standards that a multilateral development bank must comply with.

One year after the launch of the AIIB, how are the projects that you have invested in so far, especially in Indonesia?

So far, we have four major projects up and running, with total financing of around US$500 million: a power plant in Bangladesh, a road in Tajikistan, an urban project in Indonesia and a toll road in Pakistan.

In Indonesia, the name of the project that we financed is the National Slum Improvement Project. Although a big chunk of the investment there still comes from the government, we participate in a cofinancing mechanism together with the World Bank — each of us invests $217.5 million — as well as the ADB, which has a relatively small stake there.

It is basically a kampung improvement project where we invest in the revitalization of basic infrastructure such as drainage systems and water supply access in 150 cities throughout Indonesia. We supported this project because it was the most ready project available.

Our [financing] target this year is $1.2 billion and some projects have already been proposed for it.

What kind of criteria must a project fulfill before it can be financed by the AIIB?

Our current ability, particularly on funding and project preparation support, remains very limited and automatically countries that put forward their projects to the AIIB will have a bigger chance of getting our approval if the projects are already well prepared. I specifically wish that Indonesia could recommend projects that are both ready to be executed and fulfill the standards set by the AIIB.

As a former official at the Office of the Coordinating Economic Minister, I handled many government priority projects whose financing could feasibly be proposed to the AIIB, such as the trans-Sumatra toll road, or other big projects. We are yet to look at the government’s 35,000-megawatt power plant projects because we assume those [that are ready] are still small-sized power plants.

We look for big projects — the ones that, if executed, would trigger massive multiplier economic effects. This kind of project, for the AIIB, is really appealing.

We are now also working with governments to convince private sectors concerning the projects’ feasibility. The presence of multilateral development bank in a project — whether it is the World Bank, the ADB, or the AIIB — would hopefully make the private sectors feel more secure on their investments. We wish to become the bridge between the government and the private sector, so the latter would be keener to invest in infrastructure projects.

What is the AIIB’s perspective on the environmental impact of infrastructure projects? The World Bank, for example, is particularly strict about the financing of coal power plants.

Our standards will remain high, but we are not ruling out at all the possibility [of financing] coal-related projects. Developed countries might have the view that coal is not a good thing for future generations, but they must also realize that in Asia there are still many poor countries where greater electricity supply is really critical.

The question now is: What kind of coal-processing technology can we still tolerate? A case in point is the coal power plant in Batang, Central Java, which implements ultra-super critical technology. The Japan-made technology is the most advanced coal-processing technology with a different environmental impact. It is far better and far cleaner compared to common coal-fired power plants.

The point here is the AIIB will not write off coal-based projects completely. We are pragmatic. If a country like Indonesia wants to push for, say, gas or geothermal power, those electricity sources are very expensive and might well still be beyond our financial capacity. But, we will also be asking questions to governments: ‘Are you sure that there [are no] other alternatives besides this coal project?’

The US has been particularly critical on whether the AIIB will be able to fulfill high international standards like those applied by other multilateral organizations. How do you respond to this?


Make sure that you understand that this is not a Chinese bank; it’s a multilateral bank. International standards will not be sacrificed because countries such as Germany, the UK, France and Australia are here and they certainly do not want to see weak governance in the bank.

We are very concerned about governance levels, but we do not want the process [of loan disbursement] to be as protracted as at the World Bank or the ADB. There the process could take one or one-and-a-half years — by then the project would have already lost momentum. This has been the objective of the AIIB’s establishment from the start: How to make a strong, efficient financial institution while still abiding by international standards.

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