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Infrastructure development in Indonesia requires financing of $150 billion USD and the public sector can only absorb a small part, leaving a sizeable gap for the private sector to fill. Micro, SMEs have always been the backbone of a country’s sustain- able economic growth and Indonesia is no exception with these businesses account- ing for more than 90% of employment.
Flourishing Future
IFC, a member of the World Bank Group, is the largest global development institution focused on private sector development. With an investment portfolio in excess of $45 billion USd, IFC operates in over 100 countries and helps developing countries achieve sustainable growth by financing private sector investment, mobilising capital in international financial markets and pro- viding advisory services to businesses and governments. The East Asia and Pacific region has particularly benefited from IFC’s work in financing private-sector projects aimed at improving access to electricity, clean water and health care, and mitigat- ing the impact of climate change. IFC also invests in less-developed countries and poorer regions of middle-income markets. IFC’s global expertise is also valuable in helping companies in China, Indonesia and other countries, expand outside of the East Asia Pacific.
Broad Support
IFC in Indonesia has three strategic objectives; reduce the impact of climate change, increase rural incomes and pro- mote sustainable urbanisation. Key areas
include improving access to finance, in- frastructure development and provision of clean energy. “Infrastructure development and greater access to financial services will create jobs and give opportunity for people to escape poverty, while clean energy will help tackle the world’s biggest issue that is climate change,” commented Suri.
Financial services: IFC has invested about $150 million USd in the commercial bank, BTPn, helping the bank reach out to domestic businesses and female entrepre- neurs. Equity investment in Bank Hana is also helping the bank serve SMEs.
As of June 2012, IFC’s portfolio reached close to $1.3 billion USD, of which over $900 million USD are from IFC’s own account.
Cleaner energy: In 2012 IFC acquired around 11% ownership of PT Medco Power Indonesia. This company aims to provide energy to more than 2 million Indonesians via hydropower and natural gas. IFC also supported Jakarta’s provincial government in issuing a “Green Building Code” that sets energy and water efficiency requirements for buildings. This effort will reduce energy consumption in residential and commercial buildings and cut carbon dioxide emissions.
Infrastructure Development: IFC is supporting PLN, Indonesia’s state-owned electricity enterprise, in a PPP project by providing advice for a fair and transparent bidding process. To support the oil and gas sector, IFC has also made an equity invest- ment of around $40 million USd to estab-
lish PT Indonesia Infrastructure Finance (IIF), a non-bank financial institution that focuses on providing long-term funding for infrastructure projects in Indonesia. An ad- ditional $55 million USd of investment has been provided to PT Wintermar offshore Marine Tbk to allow the company to oper- ate in remote offshore Eastern Indonesia.
Inviting Investment: IFC works with the Indonesian national and provincial gov- ernment to help foster business growth by improving the coherence of business regu- lations. Support of the Jakarta provincial government in the launch of a Central Ja- karta “one-Stop Shop” will help to simplify regulations including business registration, trade license requests, and building permit applications.
Suri believes that “Indonesia plays an increasingly important role in the global economy. Against this backdrop, Indone- sian companies have to compete against enterprises from other emerging econo- mies not only for market share but also for capital. Conducive investment climate and good corporate governance become es- sential in increasing investor confidence in Indonesian companies and in the general business environment, and supports sus- tainable economic development.”
Fully Committed
During the 2012 fiscal year, IFC invested about $300 million USd in eight projects. These commitments are expected to im- prove access to finance for 1.6 million people and 5,000 SMEs, increase access to infrastructure for more than 8.5 million people, and improve the productivity of over 11,000 farmers, increasing their com- bined annual income by more than $9 mil- lion USd.
EConoMY
Empowering Business
If the private sector is the key to delivering Indonesia’s important development projects, then IFC is the organisation that helps open the door.
SarveSh SurI
Country manager, International Finance Corporation (IFC) Indonesia
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STRATEGY IndonESIA 2013