Govt wants to utilize non-bank funds

Govt wants to utilize non-bank funds

Urip Hudiono, The Jakarta Post, Jakarta

The government wants to tap into the more than Rp 200 trillion
(US$21.5 billion) worth of resources that non-banking financial
institutions (NBFI) in the country manage, to help finance long-
term investments, including major infrastructure projects.

"There is currently some Rp 40 trillion in directly available
funds that pension fund managers, life insurance firms and mutual
fund managers can use for investments," Coordinating Minister for
the Economy Aburizal Bakrie said on Monday, during a two-day
workshop on the development of the country's NBFIs.

"This has huge potential that should be developed and
optimized for the country."

This potential, Aburizal said, had been largely untapped, with
the country's banking sector still accounting for more than 95
percent of financing activity in the country.

"More than 98 percent of this is used for short-term
investments that have a maturity term of less than one year," he
said.

Aburizal said NBFIs would be encouraged to participate in the
financing of long-term investment projects, including the
government's plans to develop the country's infrastructure during
the next five years.

"Such long-term investment projects are also in line with
their capital portfolios," he said.

The government held an Infrastructure Summit in January,
offering 91 major infrastructure projects worth US$22.5 billion,
with another batch of projects worth $57.5 billion to be offered
later this year.

Of the total $150 billion in financing needs for the projects,
one-third will be funded by domestic sources including the state
budget, while multilateral lenders are expected to contribute
some $10 billion, leaving global private investors to provide the
remaining $90 billion.

World Bank finance and private sector development coordinator
P.S. Srinavas said that pension fund managers and life insurance
firms in the country were estimated to have assets of more than
Rp 130 trillion, while mutual funds were worth another Rp 100
trillion, money which could be used to fund a more diverse and
sound financial sector in the country.

To encourage NBFI investments, Aburizal said the government
would provide NBFIs with tax breaks and policy incentives.

"We will, for example, no longer limit NBFI participation in
investment projects to a maximum of 10 percent, but will allow
them to participate more than that," he said.

Commenting on the changes, Indonesian Pension Funds
Association chairman Satino said he hoped the government would
guarantee NBFI investments in infrastructure projects.

"Many pension fund managers prefer to invest in bonds, rather
than the more risky stocks in companies conducting projects,
because we are responsible over our customers' funds," he said.

"If the government wants to encourage more investment from us,
they should at least give some sort of assurance over our
investments, particularly if the projects are conducted by state-
owned enterprises."