Fiscal Policy Office,

Ministry of Finance of the Republic of Indonesia

Presented at

The 7th APEC Senior Finance Officials Meeting (ASFOM7),

Tokyo, Japan, 18-19 February 2010

Infrastructure Finance in Indonesia

Indonesia Infrastructure Financing

Indonesia needs to invest US$143 billion in infrastructure development over the next 5 years (2010 – 2014). However the Government has limited budget to fullfill it.

Due to this budget limitation, a large-scale private sector participation is essential to fill the gap. We expect that almost 70% of it will come from the private sector.

To encourage private sector involvement, the Government has developed financing facilities such as Land Fund, Guarantee Fund, and Infrastructure Fund.

2

0

200

400

600

800

1000

1200

1400

1600

US$

37.2

bio

(31%)

US$ 82.8 bio

(69%)

US$ 120 billion

Financing Gap: expected to be covered through PPP, CSR, community participation

Estimated GOI Financing Capacity

Source: Bappenas, 2009

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Infrastructure Financing Facilities 3

Land FundGuarantee Fund

(PT. PII)

Infrastructure Fund

(PT. SMI-IIFF)

Capital

market and

regulatory

reform

Land Acquisition

& Clearence

Cost Recovery /

Policy RisksProject

Financing

Preparation Bidding Construction Operation

Cost of financing Refinancing

Land Fund4

Land Revolving Fund (LRF)

Established to provide bridging finance for toll road investors in acquiring the land.

Managed by the Government Investment Unit, Ministry of Finance and will be forwarded through Toll Road Regulatory Agency, Ministry of Public Works.

Until 2009, US$ 154 million has been allocated to Land Revolving Fund.

Land Capping

Introduced to cover the risk of increasing cost of land acquisition above certain level

Government has allocated US$ 523 million for 5 years.

Infrastructure Guarantee Fund

Indonesia Infrastructure Guarantee Fund is established to satisfy the following objectives:

Improving the creditworthiness of Infrastructure PPP projects.

Improving the management of the Government’s contingent liability

The Government has established the fund under the name PT. Penjaminan Infrastruktur Indonesia (Persero) on December 30th, 2009. PT. PII is being established as a State-Owned Company and owned 100% by Government.

The Government has allocated US$ 105 million as the company’s initial capital in 2009.

Due to the operational needs and to increase confidence level of investors and lenders, the capital will be added US$ 105 million in the Government’s Budget 2010.

World Bank has committed to provide backstop facility to support the operational of PT PII.

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Infrastructure Fund

Indonesia Infrastructure Fund is intended to be the provider of long term rupiah financing to infrastructure projects in Indonesia.

Its objectives are: to offer a range of specialized financial products / services

to address the financing gaps in the financial sector

to un-bundle and re-package risks

to complement the role of the existing financial institutions and banks

to attract private long-term capital into commercially viable projects

Implemented by the establishment of PT. Sarana Multi Infrastruktur on February 26th, 2009 and PT. Indonesia Infrastructure Finance (Persero) on January 15th, 2010.

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Infrastructure Development Coverage

Development of infrastructure project is designed to accelerate domestic

economic activities as well as to improve access for intra-regional trades.

In Presidential Decree No 67/ 2005, there are 8 sectors that are

financed by Public Private Partnerships scheme:

Transportation

Road

Irrigation

Drinking Water

Waste Water

Telecommunication

Electricity

Gas and Oil

To serve the intra-regional activities, Indonesia is currently promoting

developments of ports such as in Jakarta (Cengkareng), Medan

(Kualanamu), and many more others.

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Thank You