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.
Most infrastructure financing options still unfit for insurance companies
About Rp 460 trillion-worth of the total assets owned by Indonesian insurance companies were allocated for investments in 2018.
Change Size
Fix it fast: Several technicians of state-owned electricity company PLN replace a damaged isolator in Jakarta. The construction of new power plants is an important part of the government's infrastructure development program. (The Jakarta Post/Dhoni Setiawan)
M
any insurance companies have shown interest in taking part in financing the country’s infrastructure projects, but challenges remain as the country’s capital market lacks the appropriate instruments that fit their investment requirements.
Indonesian life insurers association (AAJI) chairman Budi Tampubolon said that of the industry’s total assets of about Rp 550 trillion last year, about Rp 460 trillion was allocated for investment. “We have a lot of funds that could be managed and invested in infrastructure projects,” he said in a business forum in Jakarta on Tuesday.
Many insurance companies are eager to put money into infrastructure because it usually provides long-term investment opportunities with lucrative returns and manageable risks, he said, but existing investment instruments mostly did not fit the insurance industry’s investment criteria.
The National Development Board (Bappenas) estimated that the country would need about Rp 6.45 quadrillion in the next five years to finance its many infrastructure projects.
The state budget would only cover 37 percent of the infrastructure financing needs, while 21 percent would come from SOEs and 42 percent is expected to come from the private sector.
“This means that we need to involve more of the private sector to participate in closing the infrastructure financing gap,” Luky Alfirman, the Finance Ministry’s director general for financing and risk management, said on Tuesday during a forum in Jakarta.
Despite that many investment instruments still don’t meet the insurance companies’ criteria, the poor liquidity of such financial instruments also discouraged insurers from financing the infrastructure sector, Sustainable Development Investment Partnership (SDIP) ASEAN hub steering group co-chair Donald Kanak said at the same event.
