TheJakartaPost

Please Update your browser

Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.

Jakarta Post

RI defends itself against World Bank criticism over SOEs

Jim Yong-kim (JP/Jerry Adiguna)The government has bristled at World Bank criticism that the overbearing presence of state-owned enterprises in many projects has deterred private investors

Fedina S. Sundaryani (The Jakarta Post)
Jakarta
Thu, July 27, 2017

Share This Article

Change Size

RI defends itself against World Bank criticism over SOEs

Jim Yong-kim (JP/Jerry Adiguna)

The government has bristled at World Bank criticism that the overbearing presence of state-owned enterprises in many projects has deterred private investors.

Coordinating Economic Minister Darmin Nasution said on Wednesday that he had already explained to the Washington-based lender’s president, Jim Yong-kim, that the private sector had a much bigger role in the country’s strategic projects than state-owned firms.

Darmin stated that more than 50 percent of all the projects were funded by private investors.

“Actually, president Kim has already said that it was only the perspective from outside that the role of private investors should be bigger. He said it was only a perspective and that he never said it was true,” Darmin claimed following a meeting with the World Bank at the State Palace.

“[However, he said] perspectives need to be listened to too.”

Moreover, Darmin explained that the government was open to investment from both private and state-owned parties to allow for more profitable projects.

However, he acknowledged that state-owned firms were prioritized in urgent projects, as private stakeholders usually needed two years to prepare.

Earlier this week, Kim noted that despite the recommendations the World Bank had made for Indonesia to attract more private funds to fuel its massive infrastructure development, the dominant role of state-owned companies was an obvious deterrent to foreign funding, such as from conservative insurance or pension funds.

State-owned firms may win more profitable business projects, he said, because of certain assumed privileges such as cheaper loans and a good comprehension of the local bureaucracy and implicit government backing.

The World Bank has said that Indonesia has the potential to attract around US$40 trillion from bonds with negative interest rates or through low-yield government bonds to finance its infrastructure projects.

Currently, the National Development Board (Bappenas) lists 245 priority infrastructure projects to be executed by 2019. However, the state budget can only provide 41 percent of the Rp 4.4 quadrillion ($330 billion) required.

Last year, the government injected Rp 41.64 trillion into 35 state-owned enterprises, which will leverage the funds through various corporate measures, such as rights and bond issuances.

Moreover, state-owned lenders have primary access to state-owned construction companies in charge of a large number of infrastructure projects.

Despite prior criticism, Kim lavished praise on the country following a meeting with President Joko “Jokowi” Widodo on Wednesday.

Kim cited Indonesia as the envy of many countries given its economic growth rate of over 5 percent, and said that Indonesia could be a model for how quickly a developing country could go from low- to middle- to high-income status in the “not so distant future.”

“We believe that it is possible here. We especially believe that it is possible here under President Jokowi’s leadership, and we commit to this partnership in a way that we rarely do with a country of this size,” Kim said, adding that the lender wanted to make a case that Indonesia was one of the best places in the world for investors to invest because of the presence of so many budding industries.

The World Bank’s lending portfolio in Indonesia consisted of 31 projects as of March 2017, with a total commitment worth $7 billion. The agency’s office in Jakarta is the biggest outside its headquarters in Washington DC.

In addition to the abundant praise, the World Bank also suggested several undisclosed structural reforms essential to the government’s efforts to eradicate poverty and improve health and education.

Jokowi himself noted the importance of the World Bank in helping Indonesia improve its fiscal spending structure and quality.

He said the lender also had a great hand in helping the country work on poverty eradication, human capital investment and coping with the effects of climate change.

In a light moment during his meeting with Kim, Jokowi conveyed his appreciation for the World Bank’s decision to rank Indonesia 91st in last year’s Ease of Doing Business Index from 106th the previous year. “I know that you are here to tell me that this year the World Bank will give another upgrade,” he said with a grin.

{

Your Opinion Matters

Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.

Enter at least 30 characters
0 / 30

Thank You

Thank you for sharing your thoughts. We appreciate your feedback.