Opening Speech Seminar Panel Discussion

NEW PARADIGM IN
INFRASTRUCTURE
FINANCING Bali,
9th Oct 2018

Wimboh Santoso, Ph.D

Chairman - Indonesia Financial Services Authority
 Lesson Learning From Financial Crisis

2008/2009
US: Reviving economies through a
loose monetary policy (low interest
10 rate benchmark & QE policy)
World GDP Growth (%), 1995-2018

2013 - now
US: Normalizing its monetary policy
2 (tapering & increasing FFR), and
Weakening global commodity price
0
since 2015
1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018
-2

-4
Advanced economies
-6 Emerging market and developing economies
ASEAN-5 Downside Risks for EMs, most notably
-8
in commodity-exporting countries?
-10
Asian Financial Global Financial
Crisis Crisis

Source: World Economic Outlook Database, IMF 2

 Reviving Economic Growth From Global Uncertainties & Attracting
Global Investors Through Infrastructure

ADB research: Developing infrastructure has positive impact to economy and poverty alleviation With infrastructures:
 flow of goods and services
will be more efficient 
lowering economic costs;
 have the most notable
repercussion effect to many
industries and absorbing
many workers;
 attract investors through
FDI and portfolio
investment

1% increase in infrastructure stock was

associated with a 0.20%–0.40% increase in output

Source: https://www.adb.org/sites/default/files/publication/227496/special-report-infrastructure.pdf 3
and https://www.vectorstock.com/royalty-free-vector/smart-city-infrastructure-vector-17221565
 Infrastructure Development Becomes Top Priority Agenda For Indonesia

Wind Turbine Power Plant, MRT Jakarta APT Pranoto Airport, East
South Sulawesi Kalimantan

Trans-Sumatera Toll Road Wamena Airport - Papua

Trans-Papua Toll Road

Merah Putih Bridge, Maluku

Rotiklot Dam, East Nusa Tenggara LRT Jakarta 4

Entikong Border, West Kalimantan
New Tanjung Priok Ports

4
 Huge financing needs for infrastructure development

37 Priority Projects List Funding Scheme of 37 Priority

Projects (2017-2025)

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) and Indonesia 5
Presentation Book, January 2018
 The Nature Of Infrastructure Projects are Mostly Long-term

Aside from maturity mismatch, bank financing is also

exposed to concentration risk, given the massive amount
Multifinance Other of financing needed to build infrastructures. It is also more
Companies, Pension NBFI, 2%
5% Fund, 3% sensitive to the fluctuation in the prevailing interest
Investment rate, and at the same time provide less multiplier effect
Fund, 6%
than financing from capital market.

Bank, 73%

THEREFORE
It must be solved by a well-functioning and deepened
The banking sector continues to dominate the national capital market.
FSS with an asset share more that 70% of the total

Source: World Economic Outlook Database, IMF 6

 Comprehensive efforts to promote infrastructure financing

Supporting infrastructure financing and The National Strategy of Financial Market

deepening the capital market Development (SNP3K)
Promoting variability of financing instruments
(perpetual bonds, green bonds, municipal
bonds, komodo bonds, and blended finance)
as well as nurturing the development of a more
sophisticated markets (securitization and
hedging instruments)

Simplifying issuance process in the capital

markets and Implementing Supported Policies
(Hedging Instruments and Tax Incentives)

Expanding the investor base

Strengthening the role of Non Bank financial “THE SUCCESS of infrastructure finance
Institutions in infrastructure development largely depends on project selection”

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) and Indonesia 7
Presentation Book, January 2018
THANK YOU
 The Indonesia government continues to maintain strong commitment to keep
productive spending by shifting fuel subsidy to infrastructure development

Indonesia’ State Budget Allocation For Energy Subsidy And Infrastructure, Billion Dollars

29,98
28,66

27,48
25,43
20,03
18,56

12,79 12,44
8,63
7,03 6,64 6,90

2013-R 2014-R 2015-R 2016-R 2017-R 2018

Energy
Subsidi Subsidy
Energi (Listrik & BBM) Infrastruktur
Infrastructure Spending

Source: Indonesia Presentation Book, January 2018 9