PRODUCT

Direct Lending

SOE Direct Loan Guarantee and Corporate Guarantee

The government has issued PMK 101/2018 as an umbrella regulation on the Procedures for Providing and Implementing Government Guarantees in the Infrastructure Sector by BUPI against the Risk of Default from SOEs conducting Loans and / or Bonds Issuance

In the context of realizing nawacita associated with increasing people's productivity and competitiveness in the international market, infrastructure development in Indonesia is still constrained by funding, so that alternative financing other than the state budget is needed. Nowadays, BUMN are included in national development for infrastructure projects that are financially feasible or not. Even though BUMN is subject to the Limited Liability Company Law as a profit-oriented organizational unit, BUMN is also subject to the State Finance Law and the BUMN Law where BUMN is owned by the Government and can receive assignments from the Government.

With a large infrastructure financing target, SOEs need to develop alternative sources of innovative infrastructure funding, one of which can be done through asset securitization. Asset securitization is the process of transforming less liquid financial assets into more liquid and tradable securities. Asset securitization is one of BUMN's efforts to address the duties and functions of building infrastructure without direct support from the State Budget or Government Guarantee.

On the one hand, Government support and facilities in order to accelerate infrastructure development have had a positive effect by leveraging the APBN allocation received by BUMN. However, on the other hand, there are consequences of fiscal risks faced by the Government for the facilities and support to these SOEs. The provision of PMN to BUMN needs to go through several stages, including requesting approval from the DPR, which creates political risks. Delays in approval and disbursement of PMN funds can hamper the completion of infrastructure projects and have the potential to cause cost overruns, which not only disrupt project target outcomes to increase economic growth, but can also trigger additional PMN.