Author Topic: Indonesia poised to benefit as China's Belt and Road turns green  (Read 1174 times)

adroth

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Indonesia poised to benefit as China's Belt and Road turns green
David Li and Fajar Ibnu Ramadhan
Beijing/Jakarta | Fri, June 22, 2018 | 03:50 pm

http://www.thejakartapost.com/academia/2018/06/22/indonesia-poised-to-benefit-as-chinas-belt-and-road-turns-green.html

In September 2013, Chinese President Xi Jinping unveiled a grand vision to reawaken and extend the old Silk Road in the name of enhanced international trade, development and cooperation. The scope of this Belt & Road initiative is extensive, set to account for 30 percent of global GDP and require up to US$6 trillion of investment by 2030.

But the BRI will require up to US$6 trillion of investment by 2030. Funds are being strategically invested in transport, energy and infrastructure projects along several economic corridors, from China into Central Asia, the Middle East, Europe, Southeast Asia and Africa. While Chinese public capital is being used as an initial stimulus, investment on this scale cannot be driven by this source alone, private capital is needed to fund BRI projects as well.

Meanwhile, global demand for sustainable infrastructure is similarly booming, estimated to exceed $90 trillion between 2015 and 2030. It is now widely accepted throughout the region that there is a massive need for green infrastructure, transport, renewable power and water services along significant trade routes.

The green finance market — which comprises investments with an environmental benefit or which promote sustainability or fight against climate change — has previously struggled to meet investor demand, suffering from a lack of investment opportunities on the scale required by institutional investors. The scale of the BRI meets the demand for greater green finance opportunities.

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Indonesia has ambitious infrastructure improvement plans, particularly regarding energy, transport hubs and agricultural production. International Finance Corporation (IFC) estimates that there will be $274 billion of green investment opportunities in Indonesia in 2016 to 2030. This provides a breadth of opportunities, including large scale projects, which could generate investment under the green Belt and Road.

As private capital looks to the region for investment opportunities, Indonesia can offer a range of attractive green projects — including investments — to develop infrastructure and provide sustainable energy in a rising emerging market economy, with initial stimulus provided by Chinese public funds.

As an example, in May 2017 a consortium of Indonesian and Chinese companies building Indonesia’s first high-speed railway signed a $4.5 billion loan with China Development Bank. High speed railway projects are a well-established green use of proceeds, so green bonds or sukuk issued by Indonesian entities could be used to plug funding gaps in this project. The government of Indonesia signaled its support of green finance when it recently issued the world’s first sovereign green sukuk, which complies with the ASEAN Green Bond Standards.

Despite the interest in green investment opportunities, investors will generally only participate in projects they deem to be commercially viable. Whereas state-owned Chinese banks may be pressured to pour money into projects with questionable economic viability in the name of furthering the Belt and Road initiative, other investors may have a more limited risk appetite.

Risks include underdeveloped credit markets, inconsistent regulatory regimes and poor infrastructure, which make the initiation of local BRI projects problematic. Economic stability should — at least in theory — significantly increase once investment has been pumped in. With functioning transport links, infrastructure and affordable renewable energy supplies, local economies can grow, creating the ability to benefit from further investment opportunities.

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adroth

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Indonesia asks China for special fund under Belt and Road: ministers
« Reply #1 on: October 06, 2019, 07:06:30 AM »
Indonesia asks China for special fund under Belt and Road: ministers
Wilda Asmarini, Maikel Jefriando
3 MIN READ

https://www.reuters.com/article/us-indonesia-china-beltandroad/indonesia-asks-china-for-special-fund-under-belt-and-road-ministers-idUSKCN1TY1DU

JAKARTA (Reuters) - Indonesia has asked China to set up a special fund within its Belt and Road Initiative (BRI) for investment in Southeast Asia’s largest economy, after offering China projects worth $91 billion, government officials said on Wednesday.

Indonesia says this is because it has insisted any loan within the BRI framework is done on a business-to-business basis to avoid exposing the government in case of default.

President Joko Widodo made the request for a special fund during a meeting with China’s President Xi Jinping on the sideline of a G20 summit in Japan last week, Indonesia’s Finance Minister Sri Mulyani Indrawati told reporters.

Indrawati has been given the responsibility of coming up with the fund’s structure, including a proposal to China on the size of the fund and the criteria for loans from it, she said.

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Luhut Pandjaitan, coordinating minister for maritime affairs, separately told reporters the fund should provide loans “with low interest in regards to investment in Indonesia, in partnership with Indonesian companies”.

Pandjaitan, who overseas Belt and Road projects in Indonesia, previously said the Indonesian government had offered China involvement in about 30 projects, worth $91 billion, during a second Belt and Road Forum in April.

The most high-profile BRI venture in Indonesia is a $6 billion high-speed rail project connecting the capital, Jakarta, to the textile hub of Bandung, awarded to a consortium of Chinese and Indonesian state firms in 2015.

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adroth

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Re: Indonesia poised to benefit as China's Belt and Road turns green
« Reply #2 on: December 16, 2019, 02:11:49 AM »
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