The Jakarta Post
The haj fund could indeed become a major source of financing for infrastructure, which provides long-term income streams as returns from debts secured against real assets could be double that yielded by time deposits or other savings instruments. Moreover, financial instruments linked to infrastructure are typically hedged against inflation and offer stable returns with low volatility.
Hence, President Joko “Jokowi” Widodo’s suggestion last week that a greater portion of the haj fund, which amounted to Rp 95 trillion (US$7 billion) as of last year, should be supported. The policy directive is quite relevant because it was made during the installation of the boards of management and commissioners of the newly established Haj Fund Management Agency, which has taken over management of the fund from the Religious Affairs Ministry.
The Haj Fund Management Agency, which is politically independent, is expected to be more capable of selecting the most profitable, yet sharia-compliant investment instruments for haj funds, such as sukuk. In fact, according to the Religious Affairs Ministry, almost 40 percent of the haj funds have been invested in sukuk and project-based sukuk since 2010 under an agreement with the Finance Ministry.
Yet more encouraging is that the haj funds will steadily increase as the waiting list for the annual pilgrimage has become increasingly longer because the number of pilgrims from Indonesia, the country with the world’s biggest Muslim population, has risen significantly along with the steady income growth of the 250 million people.
Pilgrims from Indonesia have to pay upfront 75 percent of the total pilgrimage cost, which for this year was set at Rp 34 million, but often have to wait more than eight years to go on the haj because of the limited quota (211,000 for this year) set annually by the Saudi government.
The Religious Affairs Ministry and the Indonesian Ulema Council (MUI) have confirmed that part of the haj funds could be used for financing infrastructure development as long as the investment is made through sharia compliant instruments. The most promising instruments include sukuk secured with brown-field infrastructure, such as toll roads and power plants.
We should end the futile debate as to whether the haj fund could be used to finance the construction of infrastructure or not. Of the utmost importance is that the managers of the haj fund see to it that profits from investment are used entirely for improving services for pilgrims and even subsidizing pilgrimage costs.
We could learn a lot from Malaysia’s Tabung Haji (Pilgrims Management and Fund Board), which was established in 1969 and had built up net assets of US$27.5 billion as of the end of 2015. Tabung Haji has developed into a big investment fund that invests in various industries, commerce, plantations and real estate.
We should realize that an acute lack of infrastructure has become the biggest barrier to developing the economy and alleviating poverty. Our economy has not been efficiently integrated. There are wide price differences between the provinces, all because of the utterly poor connectivity between and within islands.