Indonesia : Leveraging Private Infrastructure Investment Project
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.
Southeast Asia Department
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|Project Name||Leveraging Private Infrastructure Investment Project|
|Country / Economy||Indonesia
|Project Type / Modality of Assistance||Loan
|Source of Funding / Amount||
|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 $100 million financial intermediation loan from ADB.
Availability of quality infrastructure increased (RPJMN 2020-2024)
|Description of Outcome||
Private investment in infrastructure catalyzed
|Progress Toward Outcome||Ongoing|
|Description of Project Outputs||
Availability of long-term financing and facilitation services for infrastructure projects increased
|Status of Implementation Progress (Outputs, Activities, and Issues)||Ongoing|
|Summary of Environmental and Social Aspects|
|Environmental Aspects||Annual safeguards monitoring report is being reviewed.|
|Involuntary Resettlement||Annual safeguards monitoring report is being reviewed.|
|Indigenous Peoples||Annual safeguards monitoring report is being reviewed.|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design||Subproject related consultation will be carried out by IIF and the information will be disclosed on IIF's website.|
|During Project Implementation||Subproject related consultation will be carried out by IIF and the information will be disclosed on IIF's website.|
|Responsible ADB Officer||Fransciscus, Andrew|
|Responsible ADB Department||Southeast Asia Department|
|Responsible ADB Division||Indonesia Resident Mission (IRM)|
PT Sarana Multi Infrastruktur (Persero)
|Concept Clearance||31 Jan 2017|
|Fact Finding||23 Apr 2018 to 14 May 2018|
|MRM||30 May 2018|
|Approval||18 Oct 2019|
|Last Review Mission||-|
|Last PDS Update||29 Jul 2021|
|Approval||Signing Date||Effectivity Date||Closing|
|18 Oct 2019||18 Dec 2019||01 Jun 2020||31 Dec 2023||31 Dec 2025||-|
|Financing Plan||Loan Utilization|
|Total (Amount in US$ million)||Date||ADB||Others||Net Percentage|
|Project Cost||100.00||Cumulative Contract Awards|
|ADB||100.00||26 Sep 2023||21.09||0.00||42%|
|Cofinancing||0.00||26 Sep 2023||18.84||0.00||38%|
|Status of Covenants|
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