ADB ready to give financial help to Indonesian firms
ADB ready to give financial help to Indonesian firms
JAKARTA (JP): The Asian Development Bank (ADB) is ready to extend financial aid without governmental guarantees to private firms interested in infrastructure projects in Indonesia under build, operate and transfer (BOT) arrangements, an executive said yesterday.
"The Asian Development Bank does provide direct assistance without government guarantee for build-operate-and-transfer/ build-operate-and-own (BOT/BOO) projects that meet its criteria," ADB's representative in Indonesia, T.C. Patterson, told a three- day seminar on infrastructure held by the Institute of International Research here.
He said that, under the criteria, the projects must be in line with ADB's country strategy, which is updated every two to three years in consultation with the government.
"It must complement ADB's role and activities in the given sector; it must meet the norms of feasibility and credit worthiness; and the award of the BOT/BOO contract should be based on a competitive and transparent process," he said.
Mutual fund
He said that in addition to direct lending and equity investment for its own account, ADB can assist in attracting private equity and debt capital to individual projects, and that the first modality for this is the adaption of the mutual fund window.
"To attract more funds for general investments, ADB has been instrumental in establishing a mutual fund. Now we have targeted infrastructure as a specific sector by participating in the creation of the Asian Infrastructure Fund. Co-investors in this fund include Peregrine Group of Hong Kong, International Finance Corporation (IFC), Soros Capital, Frank Russel and Associate, pension funds of major U.S. corporations and major institutional investors from the Middle East," he said.
"The US$1 billion fund, which would invest in infrastructure projects throughout the region, is expected to be fully subscribed before the end of this year," Patterson said.
"ADB may in the near future also explore the possibility of assisting in the establishment of an infrastructure fund focused exclusively on Indonesia," he added.
Patterson said that ADB has been instrumental in the establishment of Asian Securitization and Infrastructure Assurance Ltd., the first bond insurance institution in the region.
He said that the institution will provide bond investors with a guarantee on the payment of debt principal and interest. By being insured, lower grade bonds will be brought up to an investment grade which will offer two substantial benefits to issuers; namely, a reduction in the overall cost of borrowing and access to a much larger pool of institutional investors, he added.
In addition to multilateral institutions, Patterson said that sources of funding for infrastructure projects can be grouped into five categories: promoters, institutional investors, commercial banks, financial markets and bilateral credit agencies.
He said that, potentially, the most significant source of funding for private infrastructure is domestic savings, both public and private.
The promotion and channeling of savings into productive investments depend, to a large extent, on the state of banking, equity and debt markets, he said. (icn)