PT Penjaminan Infrastruktur Indonesia/Indonesia Infrastructure Guarantee Fund

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Dear all,
Today is the Grand Launching of PT Penjaminan Infrastruktur Indonesia (Persero) or Indonesia Infrastructure Guarantee Fund. This is the press release from IIGF.

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IIGF Grand Launching - Ministry of Finance, Republic of Indonesia

Jakarta, Tuesday 11th May 2010

Minister of Finance (MOF) today announced the launch of a fully operationalized Indonesia Infrastructure Guarantee Fund (IIGF), a key institution designed to help develop PPP (public private partnership) infrastructure projects in Indonesia.

The institution which acquired legal corporate status from Ministry of Law and Human Rights on 27 January 2010, is ready for full operations to provide guarantee for infrastructure projects under the PPP scheme as being regulated under Presidential Decree no. 67/2005 and its ammendment Presidential Decree no.13/2010.

Infrastructure development in Indonesia requires substantial capital. For the next five years, estimated funding requirement amounts to Rp 1.429 trillion of which approximately Rp 511 trillion would be sourced from State Budget and the rest from private participation, state-owned companies and regional governments. About Rp 407 trillion of total Rp 918 trillion expected from non-State Budget is estimated to be coming from private sector through the PPP scheme.

Acknowledging the need for significant private sector participation, the government is preparing a comprehensive framework for the overall process from project preparation, land acquisition, project funding and guarantee provision with regards to political risks. Some key institutions have been established including Land Fund (land capping and revolving fund), Infrastructure Fund and Guarantee Fund.

IIGF is a Guarantee Fund that will manage guarantee process for financial obligations of public sector under concession/PPP contract with private sector. The public sector namely Contracting Agency, includes Ministries, State Owned Company and Regional Government.

The IIGF will attract private financing into the infrastructure sector in Indonesia by improving the creditworthiness and quality of PPP infrastructure projects. The IIGF can provide guarantee cover to the private sector against risks arising from government actions, specifically allocated to those of Contracting Agency, including coverage against land acquisition delay/failure; permits delay/failure; change in law; breach of contract; failure with integrate with network/existing infrastructure; and termination risks. Guarantee can be provided for the period of pre-constructions, during constructions and operation. IIGF can cover various sector including power, water, road, bridge, port, railway, telecommunications and oil and gas.

IIGF will be the executor of government guarantee policy particularly implementing to single window policy in appraising projects, structuring guarantees and processing claims. This is to ensure the transparency and consistency in the appraisal projects and processing of all guarantee and claims.

Finance Minister emphasizes that "With the establishment of IIGF, the management of infrastructure projects will be undertaken in a more transparent, consistent and credible process, so that it will improve creditworthiness of the projects and government contingent liabilities management on guarantee provision".

The IIGF will encourage the improvement of the quality of PPP project preparation in Indonesia, by providing guarantee cover only to those projects which meet international standards of project preparation. In the event a project does not meet the IIGF's preparation standards, the IIGF will provide detailed guidance to Contracting Agencies on improving the preparation of projects seeking IIGF guarantees.

Clear and sound guarantee provision and risks allocation enable private sectors to cover risks that they now find difficult to manage. Therefore, perception of risks of infrastructure projects in Indonesia will be better. This would reduce costs of fund for infrastructure projects and hence attract more private sector participations.

To support the policies of guarantee provision, the government has injected capital of Rp 1 trillion through State Budget 2009. It is expected that additional Rp 1 trillion will be added from State Budget 2010 in order to improve guarantee capacity of IIGF. Given large value of infrastructure projects, capacity of IIGF in providing guarantee will improved through State Budget injection gradually. To enable full coverage of guarantee, IIGF utilizes its balance sheet, multilateral institutions and government budget.

Currently, IIGF in the process of seeking guarantee support from World Bank amounted of USD 500 million that could cover project risks exposure up to USD 2 billion, as an impact of AAA-rated World bank partial risk guarantee leveraging of up to 4x.

In addition to support on guarantee capacity of IIGF, World Bank, together with Singapore Cooperation Enterprise funded by Temasek Foundation, provides technical assistance to improve institutional capacity of IIGF so that the company can meet the international best-in-class standards in providing guarantees. This cooperation is designed to support Corporate Governance development, and SOP or Operating Manual, including Appraisal, Cash Management, Guarantee Monitoring as well as Guarantee and Claim Processing. The IIGF is being established as a professionally managed institution to inspire the confidence of private sector.

The IIGF is now fully operational with functioning Board of Directors and Board of Commissioners, supported by necessary Operations Manual. In addition, key staff positions have also been filled. IIGF's Board of Directors comprise Ms. Sinthya Roesly as President Director, Mr. Yadi J. Ruchandi as Chief Operating Officer and Dr. Armand Hermawan as Chief Financial Officer and General Affair. Also appointed as President Commissioner: Mr. Freddy R. Saragih and Ms. Ayu Sukorini as a Commissioner.

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Pada dasarnya, IIGF akan menjamin political risks yang akan terjadi di Indonesia pada saat pre-konstruksi, konstruksi dan operasi dan berbagai proyek infrastuktur di Indonesia. Selama ini yang menjadi masalah utama berbagai kebuntuan pembangunan infrastruktur, meskipun tender telah dilakukan adalah risiko politik yang sangat tinggi.

Berbagai proyek kini telah didaftarkan untuk mendapatkan jaminan sehingga dapat segera dijalankan, di antaranya adalah proyek KA Bandara-Manggarai, Pembangkit Listrik di Jawa Tengah dan Proyek Air Bersih di Jawa Timur.

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TEMASEK FOUNDATION, SINGAPORE COOPERATION ENTERPRISE, WORLD BANK GROUP and INDONESIA INFRASTRUCTURE GUARANTEE FUND

For Immediate Release

Joint News Release

TEMASEK FOUNDATION AND SINGAPORE COOPERATION ENTERPRISE PARTNER WITH THE WORLD BANK AND INDONESIA INFRASTRUCTURE GUARANTEE FUND TO SHARE SINGAPORE'S EXPERIENCE ON CORPORATE GOVERNANCE AND PUBLIC-PRIVATE PARTNERSHIPS TO SUPPORT INFRASTRUCTURE DEVELOPMENT IN INDONESIA

Jakarta, Indonesia, Tuesday, 11 May 2010

Temasek Foundation, Singapore and Singapore Cooperation Enterprise (SCE) announced today that they will partner with the World Bank and Indonesia Infrastructure Guarantee Fund (IIGF), a state-owned company under Ministry of Finance of Republic of Indonesia, to share Singapore's experience in corporate govemance and development of public-private partnerships (PPP) for infrastructure projects.

A Memorandum of Understanding (MOU) was signed today between the World Bank, IIGF and SCE to formalise the cooperation. It was witnessed by Indonesia's Minister for Finance, Mdm Sri Mulyani Indrawati. The programme is supported by Temasek Foundation, Singapore, with a grant amount of about SGD474,000 (IDR3.1 billion).

Infrastructure development is a priority for the Govemment of Indonesia in sustaining economic growth and improving people's standards of living. To attract greater private sector participation in the infrastructure sector, the Indonesia Ministry of Finance is working with the World Bank to operationalize IIGF. The IIGF will attract private financing into the infrastructure sector in Indonesia by improving the creditworthiness and quality of PPP infrastructure projects. The IIGF will provide guarantees cover to the private sector against risks arising from govemment actions, specifically those of Contracting Agencies which are the line Ministries, State-Owned Enterprises and Regional Governments, including coverage against land acquisition delay/failure; permits delay/failure; change in law; breach of contract; failure to integrate with network; and termination.

The technical assistance from Singapore has been coordinated under the World Bank-Singapore Urban Hub, which represents the partnership between the Government of Singapore and the World Bank.

"Singapore is a key development partner for the World Bank, and the World Bank-Singapore Urban Hub allows us to leverage our global knowledge and Singapore's recognised experience in corporate governance, urban management and infrastructure finance to provide solutions to our client countries. Through the SCE, we are able to secure the participation of public sector agencies in Singapore and also the private sector to extend joint assistance for priority initiatives in the region." said Mr Kamran Khan, Head of the World Bank Singapore Office and Program Director for the World Bank-Singapore Urban Hub.

Under the MOU. SCE will put together a team of Singapore experts to assist in the development of IIGF's corporate governance framework, management structure and operational functions. In addition, SCE will be organising a series of workshops for more than 50 Indonesian government officials, to share its experiences and best practices in managing and structuring PPPs in the infrastructure sector. These workshops will also provide a platform for IIGF to establish a dialogue with Singapore's public sector agencies and the project financiers and investors based in Singapore and the East Asia region.

Speaking at the signing ceremony, Mr. Alphonsus Chia, Chief Executive Officer of Singapore Cooperation Enterprise said: "SCE is glad to have this opportunity to partner the Indonesia Ministry of Finance and World Bank in this important and meaningful initiative to encourage infrastructure development in Indonesia. This programme reflects the growing partnership between Singapore and the World Bank, and our shared commitment to Asia's development. Through sh~ring Singapore's experience in corporate governance and development of PPPs infrastructure projects, we hope to strengthen our relations with the Government of Indonesia and also explore new business opportunities."

"Temasek Foundation is pleased to be part of this partnership as building capacities in developing governance frameworks is a key focus of our mandate. Through our grant funding, we hope that this cooperation will contribute towards a well-structured framework to harness greater opportunities for infrastructure development in Indonesia, "said Mr Benedict Cheong, Chief Executive Officer of Temasek Foundation, Singapore.

Jointly Issued by Temasek Foundation, Singapore Cooperation Enterprise, World Bank and the Indonesia Infrastructure Guarantee Fund.