Maybank Expects USD264b Infrastructure Capex in Indonesia in the Next Five Years
September 14, Jakarta – Maybank, ASEAN’s fourth largest bank by assets, said at the Invest ASEAN Indonesia conference today that it estimates Indonesia’s infrastructure capex will reach USD264 billion for the period 2016 – 2020, equivalent to 30-35% of the country’s GDP.
Taswin Zakaria, President Director of Maybank Indonesia said that the current macro environment in Indonesia is very supportive of infrastructure development, which is urgently needed in the country. “Low interest rates allow for cheaper funding for infrastructure projects; inflation has been steady at around 3.5-4.0% in the last two years and the Rupiah has also stabilised. On the fiscal side, the Indonesian Government has managed to keep the budget deficit/GDP to below 3%. Furthermore, the Government has been rolling out regulations to hasten implementation of infrastructure projects.”
As for funding, Maybank expects about 70% of the total capex or USD190 billion to come from private funding (domestic and international), while the remaining 30% will be provided by the Government.
Taswin added “The Government’s focus on infrastructure development will also reduce logistics costs, help the lower-income group increase productivity, and narrow the income gap. We expect this to spark strong growth in Indonesia’s mass market consumer sector over the next decade.”
Meanwhile, Dato’ John Chong, CEO of Maybank Kim Eng Group said that while banks will continue to be the traditional funding source, the capital market could offer possible alternatives. He said, "Both the bond and equity capital markets in Indonesia are relatively under leveraged compared to the other markets in ASEAN and have significant capacity to fund some of these projects. Bonds in particular, allow project sponsors to better match their financing cost with the IDR receivables received from these projects, which normally have long gestation periods.”
He added that Maybank Kim Eng was already actively supporting infrastructure financing needs in Indonesia, having recently acted as the Sole Lead Arranger for a USD300 million Onshore USD MTN Programme for PT Sarana Multi Infrastruktur (Persero), the state-owned enterprise mandated to accelerate the provision of national infrastructure funding. Amongst others, Maybank Kim Eng also acted as the Exclusive Financial Advisor and Mandated Lead Arranger for PT Mabar Elektrindo’s financing of its maiden 300MW coal-fired power project located in Medan, Indonesia.
“We expect there will be increased issuance in the medium term as more infrastructure financing projects get underway and demand for financing picks up,” Dato’ John said.
Themed ASEAN’s Next Wave: Building the Infrastructure of Opportunity, this year’s conference focuses on the region’s huge potential in its infrastructure build-up, in particular Indonesia, where the Capex for the 2016-2020 period is expected to be among the highest in ASEAN.
Held at the Grand Hyatt Jakarta, Invest ASEAN Indonesia attracted over 400 Indonesian and regional delegates including 27 Indonesian corporates with total market capitalisation of USD144 billion and close to 100 portfolio managers with Assets Under Management of USD831 billion.