Indonesia studies green bonds
Workers construct a new toll road which will be connected from Depok's administration town to the capital city of Jakarta. Indonesia is looking into infrastructure and green bonds, a senior adviser to the government said on Thursday, as the biggest economy in Southeast Asia is in need of billions of dollars for the sector's development. Indonesia will need $140 billion over the next five years in infrastructure development ranging from paving roads and highways to providing more power and water supplies nationwide. Picture taken August 31, 2010. (Reuters)
Published: Sep 2, 2010 23:46 Updated: Sep 2, 2010 23:54
HONG KONG: Indonesia is looking into infrastructure and green bonds, a senior adviser to the government said on Thursday, as the biggest economy in Southeast Asia is in need of billions of dollars for the sector's development.
Indonesia will need $140 billion over the next five years in infrastructure development ranging from paving roads and highways to providing more power and water supplies nationwide.
As much as two-thirds of that amount would have to come from the private sector, adviser Edward Gustely said.
"I've been in discussions on infrastructure bonds and green investment bonds and again, it's a combination of the ability to tap into institutional capital that is looking to participate in this," Gustely told Reuters.
"It's being studied both by the government and the private sector," he said on the sidelines on a conference in Hong Kong, but added that no details had been decided. In nearby India, the government plans to issue tax-free infrastructure bonds with a minimum tenure of 10 years to help the funding of the construction of roads, ports and power plants, a scheme that Indonesia is studying.
Emerging Asian countries, such as China, India and Indonesia, have been trying to boost their infrastructure to help fuel economic growth and manage fast-expanding cities, where hours-long traffic jams are common.
A lack of power supply would also mean frequent outages in industrial towns, hampering factory output and incurring costs for investors.
"The lack of infrastructure over the next few years is the only (thing), in my assessment, holding back Indonesia," Gustely said.
"If you're a plastics manufacturer the last thing you want is a power outage that costs you money. We've got an issue with power generation and that affects the industrial aspects of Indonesia."
Indonesia's economy is expected to expand by 6 percent this year and 6.3 percent in 2011, then reaching as much as 7.7 percent by 2014, officials said, but the levels still lag China and India.
Indonesia has been trying to attract more foreign investors to pour money in its infrastructure, but some global institutions are concerned about regulations and practices when investing there compared to say, China and India.
There is a lot that needs to be done throughout Indonesia, a sprawling archipelago with thousands of islands.
Only 53 percent of Indonesia's population have access to electricity from power grids, and only a third have piped water, Gustely said.
Indonesia's capital Jakarta is overcrowded, set in an earthquake zone, prone to flooding and crippled by inadequate infrastructure.
"Every year we fail to (fix the situation), we lose time and the situation gets worse," said Gustely.
