Infrastructure development key to rapid growth in Indonesia: WB

JAKARTA, April 12 (Xinhua) -- The World Bank's Managing Director Juan Jose Daboub said that Indonesia is well-positioned to achieve rapid growth through greater and more strategic investments in infrastructure, a press statement said here on Monday.

This statement was made during Daboub's one-day visit to the Indonesian capital, ahead of the Asia-Pacific Ministerial Conference on Public-Private Partnerships (PPPs) for Infrastructure to be held in Jakarta on April 14-17, 2010.

"Indonesia has weathered the global financial crisis very well. Now, infrastructure is the key constraint to rapid growth and improved investments for many middle income countries. It is important for Indonesia to meet the challenges, including lining up a pipeline of bankable public-private partnership projects and being able to demonstrate a record of improving governance and effective control of corruption," said Daboub.

To support the Indonesian government's effort to raise infrastructure investment, the World Bank has advised on the design and structure of the Ministry of Finance's initiative which is the Infrastructure Guarantee Fund.

As an independent public entity, the fund will provide guarantees to mobilize local and international private financing for well-structured public-private partnership projects. The fund will also serve as the single-window for appraising all PPPs requesting government guarantees, help improve the quality of PPPs and protect government from any liability.

Under the Infrastructure Guarantee Fund, the World Bank has indicated it might provide partial risk guarantees of up to 500 million dollars to help cover about 2 billion dollars of PPP project debt incurred through government of Indonesia's actions.

Another mechanism to support infrastructure investment is a private sector non-bank financial institution called PT. Indonesia Infrastructure Finance, to which the World Bank and Asia Development Bank has provided support with a loan of 100 million dollars each.

"We believe that these innovative financing platforms established by the Indonesian government will encourage significant investment to improve infrastructure across the country," said Daboub. "We are willing to support these efforts and help mobilize the necessary resources to further develop Indonesian infrastructure."

According to the World Bank's latest Indonesia Economic Quarterly update, 6.6 billion U.S. dollars of foreign capital has flowed in since June 2009. This, according to the World Bank, shows that Indonesia is poised for government-catalyzed and private sector-driven investment that can be further raised with the right policy improvements for the investment climate.