Pension funds to invest in infrastructure
The Jakarta Post, Jakarta
Members of the Association of Indonesian Pension Funds (ADPI) are considering investing some of their funds worth Rp 68 trillion (US$7.48 billion) for infrastructure projects this year, according to ADPI Chairman Satino.
Satino said on Wednesday that the investment would be in the form of capital injections for companies that would be actively involved in such projects.
"We are considering that direction, but there must be a clear set of investment instruments such as bonds and stocks," he said on Wednesday.
Satino added that the investments would likely be allocated for the purchase of stocks and bonds of companies operating in sectors related to infrastructure development, such as power, telecommunications, roads, and others.
Indonesia will need up to $150 billion to finance its massive infrastructure projects over the next five years. In the first round, the country has offered 91 projects worth $22.5 billion to investors through the recent Infrastructure Summit.
Coordinating Minister for the Economy Aburizal Bakrie said that a second round of offers worth $57.5 billion is scheduled for November.
Chairman of the government's Infrastructure Financing Team, Raden Pardede, has said that as a follow-up to the Summit five infrastructure projects worth $16.8 billion would be officially offered through open tender in March 2005.
"Pension funds will help finance the infrastructure sector but how are we going to do this will depend on what (investment) instruments will be used," Satino said.
"And of course, we will choose the ones that offer the most benefits to us."
According to the Institute for Development of Economy and Finance (Indef) -- a Jakarta-based think-tank -- investing in the infrastructure sector has good prospects as Indonesia will be allocating a lot of funds for such projects in the future.
"Pension funds can participate through a capital injection to help finance infrastructure projects," Indef director Aviliani said at a seminar called Indonesia Market Update 2005 and Optimization of Pension Fund Portfolio Investments organized by ADPI and Batavia Prosperindo Aset Manajemen on Wednesday.
However, the instruments for such investment should be set up first, she said.
"The period of the investment must be more flexible," she said. "If investment recovery in infrastructure projects usually takes 15 years, it should now be shortened to five years."
The total value of funds held by ADPI members reached Rp 57 trillion as of the end of 2004, a 19 percent increase on 2003. The largest portion of pension fund investment was allocated to state bonds. (003)