Indonesia in Need of Infrastructure Bank

VIVAnews – Chairman of Indonesian Banks Association (Perbanas), Sigit Pramono, said that the country is in desperate need for an infrastructure bank as infrastructure funding requires long-term loans of 7 to 15 years.  Meanwhile, commercial banks only have short-term financing. 

“Imagine, [with only] 3-monthly sources of fund, banks have to channel 7-15 years of loans. This will lead to mismatch in bank liquidity management,” said Sigit today, Jan 26.

As to doubts surfacing on sources of fund for the infrastructure bank, Sigit said, long-term fund sources like equity, issuance of bonds, as well as foreign loans with easy and long-term interests will be available. 

Earlier, the government has agreed to create infrastructure bank to finance all construction projects throughout the nation, whether related with the master plan program of accelerating and expanding Indonesia’s economic growth (MP3EI) or not. 

However, the government has yet to decide on the proper form of financial institution for the planned infrastructure bank as expected by President Susilo Bambang Yudhoyono.

Coordinating Minister for the Economy, Hatta Rajasa, explained that the cabinet meeting yesterday discovered a number of options for setting up an infrastructure bank. The first option is to strengthen the existing financial institution such as PT Sarana Multi Infrastruktur (Persero) and PT Indonesia Infrastructure Finance (IIF).

“We have SMI and IIF.  If it’s urgent, then we can use the existing institutions to issue out bonds to strengthen the infrastructure’s capital and financing,” said Hatta after the meeting in Jakarta on Wednesday.