It is considering to use a scheme called blended financing, which has an estimated potential to reach US$12 trillion, in a number of infrastructure projects in Indonesia, Coordinating Maritime Affairs Minister Luhut Binsar Pandjaitan revealed on Tuesday.

Blended financing refers to a mechanism by which overseas development assistance (ODA) is combined with either private or public funding to support high risk investment. It is seen as a strategic measure to boost the leverage of certain projects and mobilize private capital into emerging and frontier markets, especially for developmental purposes in order to achieve Sustainable Development Goals (SDGs).

“We see the potential of using blended financing to execute projects in Indonesia. [...] It’s an interesting opportunity for us,” he said, referring to light rail transit (LRT) and geothermal power plants as examples.

Luhut, however, said the government, particularly the Finance Ministry, along with Bank Indonesia, was still looking for the legal financial structure to funnel the funding from the blended finance scheme, adding the possibility of involving a government guarantee.

“If we find the structure, we can have affordable funding for our infrastructure projects,” Luhut said.

The current administration under President Joko “Jokowi” Widodo has the ambitious goal to massively build infrastructure, including 3,258-kilometers of railway, 1,000-km of toll roads, 2,650 km of roads and 49 new dams by 2019, requiring Rp 4.7 quadrillion (US$347.9 billion) in investment.

Of the figure, the state budget can only fund Rp 1.94 quadrillion, or 41.3 percent, leaving 36.7 percent to private investors and 22 percent to state-owned enterprises (SOEs).

However, state-owned construction firm PT Waskita Karya has recently faced difficulties in raising the funds for 10 toll road projects.

The deputy for maritime sovereignty at the Office of the Coordinating Maritime Affairs Minister, Arif Havas Oegroseno, described blended financing as something similar to a stack of investment under standardized investment returns.

The funding stack will consist of investment from private investors and funds from philanthrophic institutions or international lenders, such as the World Bank, and optionally, government funds.

“The [standard investment] return [for private investors] is around 25 percent annually,” Havas said.

He further said that the government would list the projects, from short term to long term ones, that would potentially be supported by the scheme.

It would also prepare for the regulation for such a scheme, which might be related to foreign investment or even public-private partnerships (PPP), Havas added.

He further underlined that the blended financing could serve as an urgent answer for the government’s lack of infrastructure financing amid the impossibility of dependence on loans.

The Organization for Economic Cooperation and Development (OECD) notes that ODA mobilized $81 billion from the private sector between 2012 and 2015 through blended financing schemes.

Executive director of the Institute for Development of Economics and Finance (INDEF) Enny Sri Hartati said that as the infrastructure development generally involved public interests, the funding should be clear and transparent.

“Investment has never been a free lunch meal. So, there should be good and comprehensive planning,” she said, adding that the blended financing scheme would be feasible to apply as long as it did not contradict prevailing laws, while the flows of funds was also transparent and accountable.

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