- The Covid-19 pandemic affects the regional governments’ fiscal capacity to increase the government’s spending to stimulate local economy.
- PT SMI is providing loan to DKI Jakarta and West Java Provinces as part of the National Economic Recovery program.
JAKARTA, JULY 27, 2020 – The government mitigated the significant impact of the Covid-19 pandemic on the Indonesian economy by launching the National Economy Recovery program (“PEN”) to stimulate the economy for a better growth in the second half of 2020. PT Sarana Multi Infrastruktur (“PT SMI”) takes part in Regional PEN programs by channeling the financing facility to assist the regional governments in providing the stimulus needed for economic recovery.
Amid the uncertainties during the pandemic, the government takes a critical role in the economic recovery since almost all the public and private sectors are heavily affected by Covid-19. As the Finance Ministry’s Special Mission Vehicle, PT SMI is in a mission to support the implementation of government policies by providing alternative sources of finance through the Regional PEN program aimed at increasing regional government’s capacity in stimulating the regional economy.
The Finance Minister gives her remarks in the signing ceremony of the Cooperation Agreement between DKI Jakarta Provincial Government, West Java Provincial Government, and PT Sarana Multi Infrastruktur (Persero) on the National Economic Recovery Loan, Monday, July 27, 2020. Several key officials attend the event, namely the Coordinating Minister of Maritime and Investment Luhut B. Pandjaitan, the Coordinating Minister of Economic Affairs Airlangga Hartarto, State-owned Enterprises Minister Erick Thohir, Home Affairs Minister Tito Karnavian, West Java Governor Ridwan Kamil, DKI Jakarta Governor Anies Baswedan and board of directors of PT SMI.
Burdened by the widespread of Covid-19 pandemic, the regional governments in Java are predicted to run a fiscal deficit in 2020 as the regional economic growth to falter which in turn will lead to the decrease in regional government’s revenue. In addition, the increase of the regional government’s fiscal deficit will also negatively affect their fiscal capacity, thus dampen the post-pandemic regional economic recovery.
DKI Jakarta and West Java Provinces are the first regional governments to tap into Regional PEN program which the government conceived to support the fiscal capacity of regional governments affected by the Covid-19 pandemic. West Java Provincial Government requested to use the funding to finance economic recovery programs at regency, city, and provincial that include the health sector, water supply and sanitation, housing, and logistic. Whereas DKI Jakarta Provincial Government to finance infrastructure projects in various sectors such as flood management, water supply, waste management, transportation, tourism, culture, and sports that will stimulate the economic recovery of the capital.
The main goal of the government’s economic recovery initiatives is creating jobs that will help enhance the consumers’ purchasing power. In this regard, the Finance Minister reminded the regional governments to formulate labor-intensive economic recovery programs in a bid to create as many jobs as possible in which PT SMI is also required to contribute to.
As a state-owned enterprise under the Finance Ministry, PT SMI is taking the role as the development agent in driving the national economy, especially in supporting the PEN program which requires close coordination between the central government, regional governments, and SOEs. In addition, the central government’s support to strengthen the fiscal capacity of regional governments in mitigating the impact of the Covid-19 pandemic can help them to be more focused on implementing economic recovery programs.
President Director of PT SMI, Edwin Syahruzad said that the budget relocation policies have made the regional governments to allocate budget to accommodate the Covid-19 related spending. Meanwhile, fiscal relaxation policies that include regional taxes led to the decrease of the regional revenue. This is when the Regional PEN facilities, funded by State Budget Revenue & Expenditure (APBN) and PT SMI, comes in handy. It helps regional governments to increase their spending to mitigate the impact of the Covid-19 pandemic on the economy.
The financing cooperation between PT SMI, West Java Provincial Government, and DKI Jakarta Provincial Government is a statement to the central government’s support in stimulating the Covid-19 impact mitigation effort and preventing the regional economy from further economic downturn. This is in line with PT SMI’s vision as the catalyst of national infrastructure development as well as the trusted and professional promotor of sustainable development that gives positive impacts on the economy, society, and environment.
In addition to Regional PEN, PT SMI’s portfolio in regional loan facilities has supported many regional governments in developing regional infrastructure for years. Until May 2020, PT SMI has delivered financial support to 23 regional governments in Sumatra, Kalimantan, Sulawesi, Bali-Nusa Tenggara, and Maluku-Papua and the proceeds are mostly used to build roads, bridges, hospitals, and marketplaces. PT SMI will continue to support the development of regional infrastructure with 29 financial packages in the pipeline that will benefit 23 regional governments.
In addition to the financing agreement, Finance Ministry today issued in-principle approval letter of the feasibility support to the Legok Nangka regional final waste processing project (TPPAS) to West Java Provincial Government. Legok Nangka Regional TPPAS in West Java is the first waste management project to receive the feasibility support under the public private partnership (PPP) scheme and part of National Strategic Projects to support president’s directive on the achievement of 100% waste management target in 2025.
The PPP infrastructure projects can contribute to PEN program to mitigate the impact of Covid-19 pandemic. Finance Ministry previously has issued feasibility supports to drinking water supply system (SPAM) projects under PPP scheme, namely SPAM Umbulan in East Java, SPAM Bandar Lampung City, SPAM Pekanbaru City. Several PPP projects are already in the pipeline which government set to offer them to the investors with the priority sectors in 2020 are drinking water, transportation, health and waste management.
Regional TPPAS Legok Nangka is one of those projects under waste management priority sector. The Finance Ministry’s feasibility support aimed at assisting regional governments in developing reliable waste management facility with the goal to create local self-reliance in managing waste. In this regard, the regional government which has the responsibility for processing the waste in their region need to fully implement the complete waste management procedures in a sustainable manner.
About PT Sarana Multi Infrastruktur (Persero)
PT Sarana Multi Infrastruktur (Persero) (“PT SMI”) was founded on February 26, 2009, as a State-Owned Enterprise non-bank financial institution under Finance Ministry with the mandate as the catalyst to accelerate the infrastructure development.
PT SMI provide many unique functions and products/features to support the acceleration of infrastructure development which not only functioning as an infrastructure financing but also as an enabler through the implementation of Public Private Partnership scheme that bring together various financial institutions both private and multilateral. With its regional loan product, PT SMI actively support the implementation of PPP and enable the acceleration of regional infrastructure development.
PT SMI run on three business pillars, namely (1) Financing and Investment, that financing infrastructure projects, (2) Consulting Services to provide solution to the increasing demand of professionals and experts in infrastructure sector, (3) Project Development to help Person in Charge of the Cooperation Project (PJPK) to prepare the infrastructure project.
For further inquiries:
Head of Corporate Secretary
PT Sarana Multi Infrastruktur (Persero)
Tel: +6221 8082 5288
Fax.: +6221 8082 5258
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