The Indonesian government has launched a new financial institution; Indonesia Infrastructure Finance (IIF).
The goal of the World Bank and Asia Development Bank (ADB)-backed project is to provide long-term financing and advisory services to private infrastructure projects in Indonesia in an attempt to boost the country’s flagging infrastructure investments.
The World Bank and ADB have each provided US$100mn loans which will serve as subordinated debt for IIF.
IIF will work as a commercial institution, with market-based rates and fees.
Indonesia’s infrastructure sector did not fully recover from the global financial crisis, with investments in the sector currently amounting to just 3% of GDP, a figure that the World Bank estimates should be closer to 9%.
Furthermore, the period between 1995 and 2004 saw private investment in Indonesian infrastructure drop sharply from 2% GDP to about 0.4%.
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