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Indonesia: Leveraging Private Infrastructure Investment Project

Sovereign (Public) Project | 50297-001 Status: Active

The project is aligned with the following impact: availability of quality infrastructure increased. The project will have the following outcome: private investment in infrastructure catalyzed. Output: Availability of long-term financing and facilitation services for infrastructure projects increased. The project will allow IIF to provide long-term finance to the infrastructure sector. The ADB loan will be relent by Ministry of Finance to PT Sarana Multi Infrastruktur (SMI) and then onlent to PT Indonesia Infrastructure Finance (IIF) to finance infrastructure projects. IIF will lend to subprojects at commercial terms following IIF's operations manual and ADB's subproject and subborrower selection criteria. Lending to additional infrastructure projects would offer IIF a platform to expand its project facilitation services and products such as transaction advisory and credit enhancement.

Project Details

Project Officer
Basnett, Yurendra Southeast Asia Department Request for information
Country
  • Indonesia
Sector
  • Finance
 
Project Name Leveraging Private Infrastructure Investment Project
Project Number 50297-001
Country Indonesia
Project Status Active
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3840-INO: Leveraging Private Infrastructure Investment Project
Ordinary capital resources US$ 100.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Governance and capacity development
Partnerships
Private sector development
Sector / Subsector

Finance / Infrastructure finance and investment funds

Gender Equity and Mainstreaming No gender elements
Description The project is aligned with the following impact: availability of quality infrastructure increased. The project will have the following outcome: private investment in infrastructure catalyzed. Output: Availability of long-term financing and facilitation services for infrastructure projects increased. The project will allow IIF to provide long-term finance to the infrastructure sector. The ADB loan will be relent by Ministry of Finance to PT Sarana Multi Infrastruktur (SMI) and then onlent to PT Indonesia Infrastructure Finance (IIF) to finance infrastructure projects. IIF will lend to subprojects at commercial terms following IIF's operations manual and ADB's subproject and subborrower selection criteria. Lending to additional infrastructure projects would offer IIF a platform to expand its project facilitation services and products such as transaction advisory and credit enhancement.
Project Rationale and Linkage to Country/Regional Strategy

Indonesia's infrastructure and infrastructure services are inadequate to support a modern, competitive middle-income economy and provide basic services to its people. Poor infrastructure constrains connectivity in Indonesia's archipelagic geography. Indonesia's roads, ports, and airports are heavily congested. Logistics costs are high by middle-income country standards, affecting trade and investment. Inadequate infrastructure is a drag on Indonesia's competitiveness.

The government has undertaken important institutional and regulatory reforms to facilitate infrastructure development. In 2010, with the support of ADB and the World Bank, the government established IIF, SMI, and PT Penjaminan Infrastruktur Indonesia (Persero), who have emerged as major players in the infrastructure landscape of Indonesia by providing debt financing, equity, guarantee as well as advisory services. In 2014, the government established the Committee for Acceleration of Priority Infrastructure Delivery to address coordination problems leading to delays in rolling out infrastructure projects. In 2017, the government established the Non-Government Budget Investment Financing Initiative at the Ministry of National Development Planning (BAPPENAS) to promote private and other non-budget investment in selected projects. The government plans to spend $450 billion in infrastructure development under the medium-term development plan, 2020-2024.

While continued improvements in public revenue and expenditure management will help create fiscal space for infrastructure and other priority development spending, increasing private sector participation will be essential for delivering the infrastructure development plan while reducing the fiscal burden. In 2017, the annual infrastructure expenditure of about $30 billion was dwarfed by annual investment needs of more than $70 billion before adjusting for climate change. Moreover, private sector investments have the potential to enhance the quality of infrastructure through improved efficiency as well as knowledge and technology transfer.

IIF was established by the Government of Indonesia and development partners including ADB to provide financing solutions and instruments that are otherwise unavailable in the market. In April 2019, PT Pemeringkat Efek Indonesia (PEFINDO), a national credit rating agency, maintained its national long-term rating of IIF's bonds at AAA with a stable outlook based on IIF's strategic importance, public sector and supranational ownership structure, and tight monitoring by the Ministry of Finance (MOF). IIF bonds are mostly held by institutional investors (e.g., pension funds, mutual funds, and insurance), which help channel long-term funds to infrastructure projects. IIF has an expanding portfolio and plays a critical market development role for infrastructure financing by (i) providing longer tenors (8 years on average) than what is available in the market; (ii) extending nonrecourse and limited recourse financing that support the development of a new asset class for project finance instruments; and (iii) offering scarcely available products such as mezzanine and equity finance. IIF partners with other banks and financial institutions through a syndication approach as prescribed by its investment limits. As of 2018, IIF leveraged Rp137 trillion of infrastructure investment from the domestic market through loan syndication and bonds issuance. When IIF plays the role of lead bank in the lending syndicate given its project structuring expertise, its participation adds an element of comfort to cofinanciers. In cases where IIF is not the lead bank, it undertakes an independent due diligence of the underlying risk and lenders agree on a common term sheet. Where IIF provides mezzanine or equity investments, it takes the riskier leg of the financing equation, thereby catalyzing senior bank debt. The MOF has expanded IIF's investment mandate to include social infrastructure such as health and education. To support IIF's expansion in response to the growing infrastructure finance market, the government obtained $200 million in additional financing from the World Bank and requested a new $100 million financial intermediation loan from ADB.

Impact Availability of quality infrastructure increased (RPJMN 2020-2024)
Project Outcome
Description of Outcome Private investment in infrastructure catalyzed
Progress Toward Outcome Ongoing.
Implementation Progress
Description of Project Outputs Availability of long-term financing and facilitation services for infrastructure projects increased
Status of Implementation Progress (Outputs, Activities, and Issues) Ongoing.
Geographical Location Nation-wide
Safeguard Categories
Environment FI
Involuntary Resettlement FI
Indigenous Peoples FI
Summary of Environmental and Social Aspects
Environmental Aspects Annual safeguards monitoring report is not yet due.
Involuntary Resettlement Annual safeguards monitoring report is not yet due.
Indigenous Peoples Annual safeguards monitoring report is not yet due.
Stakeholder Communication, Participation, and Consultation
During Project Design Subproject related consultation will be carried out by IIF and the information will be disclosed on IIF's website.
During Project Implementation Subproject related consultation will be carried out by IIF and the information will be disclosed on IIF's website.
Responsible ADB Officer Basnett, Yurendra
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Indonesia Resident Mission
Executing Agencies
PT Sarana Multi Infrastruktur (Persero)
[email protected]
GKBI Building, 8th Floor,
Jl. Jend.Sudirman Kav 28, Jakarta 10210
Indonesia
Timetable
Concept Clearance 31 Jan 2017
Fact Finding 23 Apr 2018 to 14 May 2018
MRM 30 May 2018
Approval 18 Oct 2019
Last Review Mission -
Last PDS Update 28 Jul 2020

Loan 3840-INO

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
18 Oct 2019 18 Dec 2019 01 Jun 2020 31 Dec 2023 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 100.00 Cumulative Contract Awards
ADB 100.00 18 Oct 2019 0.00 0.00 0%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 18 Oct 2019 0.00 0.00 0%

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

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Safeguard Documents See also: Safeguards

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Evaluation Documents See also: Independent Evaluation

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Related Publications

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Tenders

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Contracts Awarded

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Procurement Plan

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