Sri Mulyani: Indonesia Cannot Continue Infrastructure Development If Only Relying On The State Budget

Minister of Finance Sri Mulyani Indrawati. (Photo: Doc. Ministry of Finance)

JAKARTA - Minister of Finance (Menkeu) Sri Mulyani revealed that the reform of the law summarized in the omnibus law has had a positive impact in creating the investment climate in Indonesia.

One of the important results noted was the formation of an Investment Management Institution (LPI) called the Indonesia Investment Authority or abbreviated as INA.

"Why did we create this institution? Because Indonesia cannot continue building a number of infrastructures if it only relies on funding from the state budget, ”he said in the LPEM UI online seminar on Thursday, February 18.

Minister of Finance added, LPI opens ample opportunities for the government to obtain capital through more efficient means.

"We consider that there must be instruments and institutions that can seize opportunities for foreign capital management from different ways to balance the state budget," he said.

The effort to form a sovereign wealth funds (SWF) type institution is a complement to funding schemes collected from the public, such as an initial public offering (IPO).

"There is a way with an IPO, but that is not sufficient. So this SWF is one of the government's efforts to attract more capital from abroad to cooperate with us in a balanced manner to finance infrastructure, "he explained.

"It opens up opportunities but is also quite challenging in a pandemic situation. Even so, we are still optimistic to be able to maximize these instruments and institutions in helping Indonesia's development in a sustainable manner, "continued Sri Mulyani.

As previously reported, the government formed the LPI by injecting an initial capital of IDR 15 trillion from the total planned capital of IDR 75 trillion. In this capital support scheme, a mechanism for the participation of State-Owned Enterprises (BUMN) and BMN shares is also embedded in order to smooth out LPI's business activities.

Later, the state assets mandated by the LPI can be delegated to a joint venture company (investor) where the LPI retains its position as the main determinant in terms of business policy and determinants in decision making.