Indonesia : Leveraging Private Infrastructure Investment Project

Sovereign Project | 50297-001

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 Name
Leveraging Private Infrastructure Investment Project
Project Number
50297-001
Country / Economy
  • Indonesia
Project Status
Active
Project Type / Modality of Assistance
  • Loan
Source of Funding / Amount
Loan 3840-INO: Leveraging Private Infrastructure Investment Project
Source Amount
Ordinary capital resources US$ 100.00 million
Operational Priorities
  • OP3: Tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability
  • OP6: Strengthening governance and institutional capacity
Sector / Subsector
  • Finance / Infrastructure finance and investment funds

Gender
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 being reviewed.
Involuntary Resettlement
Annual safeguards monitoring report is being reviewed.
Indigenous Peoples
Annual safeguards monitoring report is being reviewed.

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.

Contact

Responsible ADB Officer
Fransciscus, Andrew
Responsible ADB Department
Sectors Group
Responsible ADB Division
Finance Sector Office (SG-FIN)
Executing Agencies
PT Sarana Multi Infrastruktur (Persero)

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
29 Jul 2021

Funding

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 31 Dec 2025 -
Financing Plan
  Total (Amount in US$ million)
Project Cost 100.00
ADB 100.00
Counterpart 0.00
Cofinancing 0.00
Loan Utilization
  Date ADB Others Net Percentage
Cumulative Contract Awards 06 Jun 2024 23.56 0.00 47%
Cumulative Disbursements 06 Jun 2024 23.56 0.00 47%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating - Satisfactory - Satisfactory - Satisfactory

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
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

None currently available.


Evaluation Documents See also: Independent Evaluation

None currently available.


Related Publications

None currently available.


The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.

Tenders

No tenders for this project were found.

Contracts Awarded

No contracts awarded for this project were found

Procurement Plan

None currently available.