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Indonesia 'must push' for more green infrastructure funding
Indonesia will need some US$6.9 trillion per year for green infrastructure construction to achieve its 2030 sustainable development targets as stipulated in the Paris Agreement.
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Green energy target: A worker inspects solar panels on top of the Energy and Mineral Resources Ministry's electricity directorate general office in Jakarta. (JP/Dhoni Setiawan)
T
he nation’s green infrastructure financing industry is expected to grow as the government pursues its sustainable development plans, but more effective utilization of national and international public funding is crucial to accelerate the process, experts say.
Climate Policy Initiative (CPI) associate director Tiza Mafira told The Jakarta Post on Tuesday that considering the government’s ambitious green infrastructure development plans, national public funding institutions had a crucial role to play in encouraging green sector investment.
Tiza suggested that state-owned infrastructure financing company PT Penjaminan Infrastruktur Indonesia (PII), for instance, expand the list of sectors, risk identification areas and projects that could be guaranteed.
“[PII] can do this by collaborating with existing public funding institutions, such as PT Sarana Multi Infrastruktur [SMI] and PT Indonesia Infrastructure Finance [IIF],” Tiza said.
Indonesia will need some US$6.9 trillion per year for green infrastructure construction to achieve its 2030 sustainable development targets as stipulated in the Paris Agreement, the Finance Ministry’s Fiscal Policy Agency (BKF) estimates.
The country relies on investment as one of the main engines of gross domestic product (GDP) growth, hoping it will create jobs, which could boost purchasing power and consumer spending. The GDP rose 3.69 percent in 2021, driven largely by a rebound in investment, Statistics Indonesia (BPS) data show.
The country, however, has not made green development projects competitive with other forms of investment. Regulatory issues, including licensing and land acquisition, have kept financing costs high for renewable energy and made Indonesia less competitive than other countries in Asia. Environmental problems surround the expansion of mining and plantation sites, carrying high risks for investment.
