The challenge in investing in strategic infrastructure

Penny Febriana
Compliance auditor at the Indonesia Stock Exchange (IDX)

PREMIUM

Jakarta / Mon, September 25, 2017 / 10:10 am

The challenge in investing in strategic infrastructure

President Joko "Jokowi" Widodo (center), Public Works and Public Housing Minister Basuki Hadimuljono (left) and Transportation Minister Budi Karya Sumadi inspect the Tanjung Priok toll road on the day of its inauguration, April 15. (Antara/Puspa Perwitasari)

Promoting investment in strategic infrastructure has been an uphill challenge worldwide, including in Indonesia. According to a 2014 report released by McKinsey Global Institute, the global infrastructure funding gap was estimated at US$57 trillion to maintain gross domestic product (GDP) growth through 2030. President Joko “Jokowi” Widodo recently encouraged state-owned enterprises (SOE) to conduct a securitization of assets to raise additional financing for infrastructure development in Indonesia. Asset securitization is part of the Public-Private Partnership (PPP) scheme. PPP schemes have frequently been implemented to finance infrastructure projects in many developed countries, like European countries and the United States. Mostly in developed countries, greenfield projects seem more attractive to institutional investors compared to brownfield projects, which is rea...