Banker suggests new project financing scheme<\/p>\n
JAKARTA (JP): A noted banker suggested yesterday that the
\ngovernment create new instruments and mechanisms to enable
\ntemporary foreign and domestic equity investors to participate in
\nfinancing investment projects.<\/p>\n
Trenggono Purwosuprodjo, chairman of the Association of
\nPrivate National Banks (Perbanas), said that in the future,
\ninvestment projects would rely more on equity and debt financing
\nfrom temporary investors, such as pension funds, mutual funds and
\nventure capitalists.<\/p>\n
\"Since the government started launching economic reform
\nmeasures in the early 1990s, banks have become less of a
\nfinancing institution and more of an instrument to assess the
\nfeasibility of a project,\" he told a seminar yesterday.<\/p>\n
The seminar, held by the Investment Coordinating Board's Rukun
\nSejahtera foundation, discussed investment strategies and
\npolicies. The seminar was officially opened by State Minister of
\nInvestment Sanyoto Sastrowardoyo.<\/p>\n
Trenggono said investors should maintain a sound balance
\nbetween the amount of equity financing and debt financing they
\nused in a project in order to maintain the project's feasibility.<\/p>\n
\"Disregarding this (balance) will not only damage the
\nproject's profitability but harm national interests as well
\nbecause it could reduce competitiveness,\" he said.<\/p>\n
Trenggono acknowledged that long-term project financing was a
\nproblem that many investors faced.<\/p>\n
This often caused investors to inflate figures in their
\ninvestment applications in order to secure larger loans and gain
\ninvestment approvals, but these practices in turn could
\njeopardize the viability of the project itself.<\/p>\n
\"For this reason a financing mechanism should be developed to
\nhelp investors get equity financing for their companies or
\nprojects,\" he said.<\/p>\n
Equity financing could come from mutual funds, venture capital
\ncompanies, insurance firms and pension funds, all of which have
\nlong-term funds, he said.<\/p>\n
\"But an institution that wants to participate in equity
\nfinancing will have to conduct in-depth analysis of the project's
\nrate of return because its participation (in the project) will be
\ntemporary,\" he said.<\/p>\n
\"Ways of divesting of these temporary investments include
\npublic listing on the stock exchange or a private placement,\" he
\nsaid.<\/p>\n
Trenggono said the government should develop new project
\nfinancing schemes to accommodate such cases because not only
\nwould direct investments continue to increase, but portfolio
\ninvestments -- particularly from developed countries -- would
\nalso grow rapidly.<\/p>\n
He said sound methods of disseminating information to
\npotential investors was needed to support such project financing
\nschemes.<\/p>\n
\"Prospective investors will need information on the company or
\nproject and its technical aspects, including the possibility of
\nfunding by mutual funds and venture capitalists,\" he said.<\/p>\n
Trenggono said that while banks would continue to be an
\nimportant source of project financing, it would be increasingly
\ndifficult for investors to get loans from them because banks were
\ngradually tightening their credit requirements.<\/p>\n
\"The capital adequacy ratio -- or the amount of capital that a
\nbank must provide for every unit of credit it gives -- will be
\ngradually raised from the current 8 percent to 12 percent by
\n2001,\" he said.<\/p>\n
Apart from that, he said, banks' funds came mostly from short-
\nterm sources, thus they were more likely to opt for short-term
\nfinancing as well. (pwn)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/banker-suggests-new-project-financing-scheme-1447893297",
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