news     May 26, 2015

Government hints subsidy on infrastructure credit interest rate

Jakarta (ANTARA News) – Finance Minister Bambang Brodjonegoro has indicated that the government may offer subsidy on credit interest for infrastructure projects.

The credit would be provided by a new financing agency yet to be established — the Indonesian Development Financing Institution (LPPI).

In a national working meeting of the Indonesian Chamber of Commerce and Industry (Kadin) on Monday night, the minister said the interest subsidy could be offered by LPPI as an incentive to accelerate infrastructure development.

The lending rate of LPPI is lower than the commercial credit rates of banks, he said. “The government, therefore, has to inject fresh fund into the agency every year,” he said.

He said he had kept the idea for quite a long time, adding the government is processing a draft law on LPPI. He said LPPI is similar to the defunct Indonesian Development Bank (Bapindo), which had merged with three other state banks to form Bank Mandiri. However, LPPI would not follow the track of Bapindo, which was beset by corruption and mismanagement, he said.

LPPI would not operate as a commercial bank and it would be focused on financing infrastructure projects, he said.  He said LPPI would operate like the World Bank or the Asian Development Bank (ADB) for infrastructure in Indonesia.

However, he did not rule out the possibility of LPPI providing credits to support development of the industrial sector and to finance trade.

Currently the government has a company PT. Sarana Multi Infrastruktur (SMI) under the finance ministry. The government has a capital participation of Rp20.3 trillion in SMI , which also operates to finance infrastructure development especially in eastern Indonesia.

“Infrastructure is a main pillar of economic development and high in priority in the government development program,” the minister said.

Earlier the National Development Planning Ministry estimated that infrastructure development in 2015-2019 would need an investment of Rp5,500 trillion.
The government hopes to provide Rp2,215 trillion or 40 percent of the fund and state companies , companies owned by regional administrations and the private sector to cover the rest.(*)



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