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)