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Brownfield investment alternative to lure private funding: Kadin
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Express line: Police personnel move a signboard at the East Brebes toll road exit in Central Java. Indonesia is planning to open up state-run infrastructure, such as toll roads, to private investors in an effort to generate fresh funding for new projects. (Antara/Oky Lukmansyah)
T
he government’s plan to share state-run infrastructure concessions with private investors will become an attractive alternative to lure private funding as it will provide the investors with more predictable return and lower risk, a business lobby group has suggested.
Indonesian Chamber of Commerce and Industry (Kadin) deputy chairman for construction and infrastructure Erwin Aksa said not all investors wanted to invest in greenfield infrastructure projects—referring to fresh projects—and instead preferred to put their money in established companies and brownfield projects—ventures that are already operating and generating cash flow.
"Investors from the Middle East, for example, have a lot of money, but they don’t want greenfield [projects]. They’re looking look for companies to take over," he said on Wednesday.
Background – no need to edit
President Joko “Jokowi” Widodo sent a strong signal earlier the day about providing brownfield infrastructure projects - which refers to projects that are already operating and generating cash flow - for global investors, by urging state-owned enterprises (SOEs) to securitize mature assets to allow private entities to enter.
Securitization is the process through which a variety of financial and non-financial assets are packaged into securities that are then sold to investors. The cash flows generated by the underlying assets are used to pay the principal and interest of the securities.
“Projects that are considered brownfield projects should be let go [to investors]. That way they will have more capital to build more,” he said during the 2016 Indonesia Infrastructure Week, arguing that investors were usually hesitant to invest in greenfield projects, which refers to fresh projects.
End of background
State-owned infrastructure financing company Sarana Multi Infrastruktur (SMI) president director Emma Sri Martini said there was no law that prohibited private investors from investing in concession-sharing schemes with SOEs.
"SOEs, however, are still reluctant to divest because the concession is related to government assets," Emma said. (hwa)
