[JAKARTA] Indonesia's finance ministry said it plans to inject $1.63 billion into PT Sarana Multi Infrastruktur (SMI) and transform the state-owned financing firm into an infrastructure bank to help fund roads, railways and seaports with private backing.
If approved by parliament, the move would mean a six-fold increase in SMI's capital to US$2.05 billion as part of President Joko Widodo's campaign to lift economic growth by improving Indonesia's creaky infrastructure. "We need this kind of institution to encourage our private investors to participate in infrastructure projects," Finance Minister Bambang Brodjonegoro said late on Thursday.
The government wants the financing firm to sharply increase its lending to 19.2 trillion rupiah this year, more than trebling its outstanding loan book at the end of 2014, senior ministry official Hadiyanto told Reuters. "With higher capacity, SMI will leverage the equity by issuing securities and then give out long-term financing based on long-term funding. There won't be liquidity mismatch," Hadiyanto said.
He said the plan could help overcome hurdles of going through conventional banks, which faced risks when giving loans for long-term infrastructure projects due to their short-term funding.
Mr Joko's administration would draft a bill to turn SMI into an institution with sovereign status, like Brasil's Development Bank (BNDES), so that it would be eligible for cheap loans from multinational banks.
The government hoped to form the new infrastructure bank by 2017.
Using funds freed by scrapping gasoline subsidies, Widodo proposed to boost spending on infrastructure by almost 50 per cent to 281.1 trillion rupiah in a revised budget for 2015 submitted to parliament this month.
Mr Joko's flagship maritime projects are to receive 11.93 trillion rupiah, the greatest share of funding. There are also funds for dams, roads and railways, mostly outside the main island of Java, and also to buy 1,000 buses for 28 cities all over the archipelago.
He also plans to increase the capital of state-owned PT Bank Mandiri Tbk, Indonesia's biggest bank by assets, by 9 trillion rupiah in a rights issue, 5.6 trillion rupiah of which the government will subscribe to, to improve the lender's capacity for infrastructure financing.
The revised 2015 budget, which includes a plan to inject a total of 72.97 trillion rupiah into 42 state-owned firms, is due to be signed off by parliament in February.