Wed, 08 Apr 2009
Jakarta (ANTARA News) - The Asian Development Bank (ADB) had approved of an investment up to 140 million US dollars as an Indonesian Infrastructure Financing Facility (IIFF) with government support to help develop infrastructure projects in Indonesia.

"However, there is a big difference between the investment needed for infrastructure projects and funding availability. This situation is posing a serious problem to the development of important infrastruture projects in Indonesia, so that this facility would significantly reduce the gap," ADB`s Southeast Asia Director Arjun Thapan said in a press release in Jakarta Tuesday.

The lack of electricity, transportation problems and the lack of other important infrastrcuture facilities are posing a problem to the country`s economic growth and to reducing poverty in Indonesia while investment from the private sector was too low due to the lack of long-term funding from bank or the stock market.

The IIFF which was designed in 2007, will provide funding assistance in the form of long-term loan instruments, capital participation or security for infrastructure projects, and therefore is expected to attract more investment in the private infrastructure sector by six to seven times the current figures.

The ADB investment will take the form of capital participation by up to 40 million US dollars for 20 percent of the stake in the IIFF, and 25 years of loans of up to 100 million US dollars for the holding infrastructure company of the government, namely PT Sarana Multi Infrastruktur with a grace period of 5 years.The loan will be channeled to the IIFF which will take care of the futher channeling of the loans.

"The IIFF will be funding infrastructure projects which are commercially feasible by offering long-term funding and know-how and skill assistance with a view to encouraging government and private partnership," ADB Director General of Private Sector Operations Department Philip Erquiaga said.

By limiting the amounts of the funding by up to 20 percent of the coast of a project, the IIFF is expected to be able to fund various projects worth 5,5 billion US dollars in the first year of its operations.

Investment in the infrastructure sector in Indonesia increased to 3-3,5 percent of the gross domestic product (GDP) in the last few years, but these figures are still lower than those prior to financial crisis in Asia in 1997 reaching 5 - 6 percent.

In the last few years, most of the investment in the infrastructure sector came from the government, while investment in the private sector had dropped in the last 10 year to less than 1 percent of the GDP in the 2000-2006 period.
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