The need for national infrastructure development to support Indonesia's economic growth amidst government budget constraints and to encourage private participation in national infrastructure development through the support of policies, instruments and the government's fiscal framework.
As the basis for PPP implementation, the government issued Presidential Regulation Number 38 year 2015 regarding Public Private Partnership in the Provision of Infrastructure. The implementation of PPP is intended to provide sustainable financing for the provision of infrastructure through the use of private funding, to accomplish infrastructure provision with quality, effectiveness, efficiency, accuracy, and promptness, and to create an investment environment that promotes private sector participation in the provision of infrastructure based on principles of good corporate governance.
The Minister/Head of Institution/Head of Region initiates the provision of infrastructure to be developed in partnership with private sector through a PPP scheme.
IIGF was established as part of government effort to speed up the development of infrastructure in Indonesia; by providing guarantees through accountable, transparent and credible process.
Furthermore, IIGF guarantee would improve the credit worthiness of an infrastructure project which could result in lower cost of financing thus ensuring private financing to the infrastructure projects.
For the government as the project owner, IIGF guarantee could improve the certainty of private sector participation and financing for infrastructure development in Indonesia. IIGF also assists the government through the establishment of a good transaction structure to increase the certainty of a successful transaction with the investor that led to the development of quality and efficient infrastructure.
For private sector, IIGF guarantee can reduce exposure to political risk in the eyes of investors and creditors therefore would lower cost of financing associated with the investment for infrastructure projects.
In summary, IIGF was established for the following purposes:
IIGF’s guarantees are expected to serve the following functions: