Wahid Sutopo, the president director of IIGF, congratulates speakers at the Infra Outlook 2020 event held at the Finance Ministry headquarters in Jakarta on Monday. (JG Photo/Tara Marchelin)

Indonesia Infrastructure Guarantee Fund Plots Another Decade of Growth

BY :TARA MARCHELIN

MARCH 10, 2020

Jakarta. In over a decade, Penjaminan Infrastruktur Indonesia or Indonesia Infrastructure Guarantee Fund, a state-owned infrastructure financing company operating under the Finance Ministry, has grown from a fringe entity in the country's development landscape into a key driver of Indonesia's rapid infrastructure growth. 

The company, better known by its English acronym IIGF, has provided guarantees to 21 public-private partnership projects worth Rp 210 trillion ($14.7 billion) and two guarantees for a direct loan worth Rp 6 trillion in the past decade.

The company's guarantees are supposed to make all sorts of infrastructure projects – road development, drinking water system, transportation, electricity, telecommunication, tourism – more attractive for the private sector to invest in. 

But not all was rosy in 2009 when the fund first opened itself for business. 

Meirizal Nur, the director of state assets at the ministry, said in the beginning the IIGF had to overcome hurdles to reach a consensus with other government institutions and other ministries.

It then struggled to convince investors to join government projects so the IIGF did very little business in its first years. 

Gradually, it managed to raise its profile by showing how a guarantee fund can prove valuable to long-term infrastructure projects by providing added values to stakeholders. 

For one, the government is left with more money to invest in new infrastructure projects when the private sector is willing to chip in for the capital. 

"We used state-capital participation to guarantee infrastructure projects with 26 times leverage ratio until the end of 2019," IIGF president director Wahid Sutopo said on Monday. 

The company also started to become more sustainable and rely less on the government's capital injection. 

"[We] got 37.5 percent of accumulated retained earnings from the total state-capital participation that had been deposited so far," Sutopo said.

In the past five years, the IIGF's financial performance has been improving, with the company scoring an "unqualified opinion" status from its external auditor and a "showing quality and quantity improvement" comment from a Boston Consulting Group (BCG) audit.

Meirizal said the company's improvements are also being reflected in the growing number of projects IIGF undertakes today. 

"We've seen a lot of changes and the IIGF now has many more projects in the pipeline," Meirizal said.

Among them is a renewable energy project by state-controlled Geo Dipa Energi. IIGF will provide a guarantee for the project, which has already secured a loan from Asia Development Bank.

Going forward, Sutopo said it's critical for the company to build an ecosystem filled with experts in alternative financing and public-private partnership (PPP) schemes.

"To that end, we've established the IIGF Institute that has already signed MoUs with 33 universities and research organizations. We will transform the IIGF into a world-class knowledge management organization specializing in capacity building, research, advocacy and e-learning," Sutopo said at the Finance Ministry's Infra Outlook 2020 event.

Sutopo said the company will also strengthen its role as a development risk manager since the success of infrastructure projects paid for by an alternative financing scheme depends a lot on what happens before an agreement is signed. 

The IIGF will also improve the quality of its facilities, which include networking, a co-working space, an auditorium, a digital platform and an expert team to support its initiatives.  

 

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