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Given the risks involved in financing infrastructure
projects, the country's banks want the government to at least provide
assurances of project feasibility, and to put financing schemes in
place that are compatible with banking practice, said Agus D.
Martowardojo, chairman of the Association of State-Owned Banks
(Himbara), on Thursday.
"Of course we want to support the government in developing the
country's infrastructure, and we actually don't have any problems in
providing the necessary funds," Agus said on the sidelines of a
workshop on infrastructure financing.
"But we have also pointed out how infrastructure projects are usually
long term in nature and entail greater risks. That's also why such
projects are usually financed through their own equity-raising schemes,
with bank loans being complementary."
Agus, who is also the president of Bank Mandiri, pointed to what he
called the "classic mismatch" in infrastructure projects -- the fact
that they can take up to 10 years before return-on-investment, while
the banks usually use short-term deposit funds maturing in only 3 years
to finance lending.
"Banks also have to adhere to strict industry regulations on lending
limits and collectibility. That's why we need some guarantees that
projects will not go awry along the way."
National Banks Association (Perbanas) chairman Sigit Pramono concurred,
saying that local banks would have no problems in funding
infrastructure projects as long as government guarantees were provided.
"But the fact that it is a government project backed by the state
budget already implies a guarantee," said Sigit, who is also the
president of Bank Negara Indonesia (BNI).
State Minister for National Development Planning Paskah Suzetta said
earlier in the workshop that Indonesia's banking sector had the
potential to contribute US$1 billion in funding for key infrastructure
projects over the next two years.
The projects included the $225-million construction of the Kuala Namu
airport in Medan to replace Polonia airport, and a $816.8-million
military reequipment program.
"This figure is based on our assessment of the capacity of local
industry to carry out these projects and local banks to finance them,"
Paskah said, while stressing that in future the government planned to
rely more on local resources so as to reduce the country's sovereign
debt.
Indonesia needs up to $65 billion for infrastructure development
between 2005 and 2009, according to the National Development Planning
Board (Bappenas), of which $14 billion (22 percent) is expected to be
provided by the domestic financial sector.
Agus acknowledged the important role to be played by the banking sector
in funding infrastructure development and in participating in financing
schemes that would address the problems facing the sector.
Bappenas deputy chairman Lukito A. Tuwo said the government was
planning two infrastructure financing schemes. Under the first one, the
banking sector would directly finance a project with the government
acting as guarantor, while under the second scheme, the banking sector
would lend money to the government, which would then disburse it to the
project promoters.
He said the government had also designed a public-private partnership
framework, and allocated Rp 4 trillion and Rp 600 billion from the
budget for the financing respectively of an infrastructure fund and a
revolving fund.
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