Jakarta. Indonesia Investment Authority, or INA, the country's sovereign wealth fund, has signed heads of agreement with state-owned construction companies Hutama Karya and Waskita Karya for $2.72 billion in investments in Sumatra and Java toll roads, the company said on Thursday.
The investment marked the fund's first investment in the country's infrastructure, much to President Joko "Jokowi" Widodo's delight.
"Today, I am thrilled. We finally break our egg," Jokowi said during a speech at the signing ceremony in Jakarta on Thursday.
The Ministry of Finance estimated that Indonesia needed $449 billion to develop its infrastructure alone between 2020 and 2024. Still, the state coffer and state-owned enterprises can only afford to cover around 58 percent of the cost.
So Indonesia set up the sovereign wealth fund last year to seek cooperation with foreign investors that could finance the country's economic development.
Jokowi hoped Thursday's agreement would create trust from investors for more projects funded by INA in the future.
“This will affect the domestic and international [investors'] trust in our ways of managing the finances. We hope the governance at INA will foster trust," Jokowi said.
The Toll Roads
Under the head of agreement, INA would finance three toll roads in Trans Sumatra built by Hutama Karya, namely the 17-kilometer Medan-Binjai toll road, Bakauheni-Terbangi Besar that spans 141 km, and the 189-kilometer Terbangi Besar-Pematang Panggang-Kayu Agung.
Meanwhile, INA's agreement with PT Waskita Karya covers two toll roads, namely Trans Java connecting Kanci-Pejagan for 35 km and Pejagan-Pemalang for 58 km.
The fund said that the total strategic financing for the toll roads reached Rp 39 trillion ($2.72 billion).
Minister of Finance Sri Mulyani Indrawati said the deal would allow INA to generate a stable stream of income from the toll roads in the future.
"At the same time, this transaction provides fresh funds for Hutama Karya and Waskita Karya because they are still tasked with missions to complete construction of the Trans Sumatra toll road," Sri Mulyani said.
The government designed Trans Sumatra, spanning 2,800 km, to connect the island to the north and south regions with its commodities-rich hinterland. Currently, six out of 24 planned segments with a total length of 531 km have been completed.