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PROMOTING AND OPTIMIZING BLENDED FINANCE
FOR FINANCING THE NATIONAL DEVELOPMENT PROGRAMS
Deputy Minister/Head of Bappenas
for Development Funding
Jakarta, March 2020
Ministry of
National Development Planning/
BAPPENAS
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The Government of Indonesia had Issued the National Medium Term Development Plan 2020 - 2024
Presidential Regulation
No. 18 of 2020
dated 17 January 2020
TOP PRIORITIES;
STRATEGIES TOWARDS
ADVANCED INDONESIA
IN 2045
Human Development
Infrastructure Development
De-Bureaucratization
De-Regulation
Economic Transformation
DEVELOMENT AGENDA
1. Quality and Competitive Human Capital
2. Character Building and Cultural Development
3. Economic Resilience for Quality Growth
4. Reducing Inequality and Ensuring Equitable Development
5. Infrastructure for Supporting Economic Development and Basic Services
7. Stability of Politics, Law, Defence and Security and Public Services Transformation
6. Environment, isaster and Climate Change Resilience
STRATEGIC PRIORITY (MAJOR)
PROJECTS
MAIN DEVELOPMENT TARGETS
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Financing for RPJMN 2020 – 2024; the Government’s Share Can Only Cover 10 % of the Need
Rp 35,212.4 – Rp 35,455.6 Trillion (equiv. US$ 2.58 - 2.60 Trillion)
to achieve average growth 5.7% - 6.0%:
Government’s share 8.4 – 10.1%
SOEs’ share 8.5 – 8.6%
STRENGTHENING QUALITY
ALLOCATION FOR THE DEVELOPMENT
PRIORITIES---
This strategy will beachieved through:• Strengthening
funding integration for the development priorities;
• Focusing the funding to development priorities, particularly for the National Major Projects.
ENHANCEMENT OF FUNDING CAPACITY
---
This strategy will be achieved through:• Promoting SOEs,
PPP, and public participation to the project;
• Developing creative financing scheme, such as blended finance, non-state budget infrastructure financing (PINA), and output based transfer (regional allocation fund)
STRENGTHENING DELIVERY
MECHANISM---
This strategy will be achieved through formulating thedevelopment program plan up to major project and at the project level as an instrument for management control.
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It is important and necessary to develop creative financing
including Blended Finance.
Blended Finance is not merely
about mobilizing funds.
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Make sure the programs are being delivered
to and benefitted the people, not just sent.
Blended Finance is one way to ensure and to
make the program delivery better.
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Adapting blended finance solutions to the local context;
vital to ensure they support development needs, consider local
development capacities and contribute to local financial markets
expansion.
2 Key Elements of Blended Finance Principles
Focusing on effective partnerships;
provides adequate risk sharing between partners while not
compromising on the standards of development finance
deployment is the key for sustainability.
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Micro Hydro Power Plant in Merangin Regency of Jambi Province
Indonesia has seen blended finance initiatives
UNDP, Baznas (the National Zakat Board), and Bank Jambi to effectively combine financing the installation of Micro Hydro power plants which introduced electricity to local villages and their 4,444 inhabitants.
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Equity/Sponsor
MoCIT – BAKTI
Implementin
g Business
Entity
Creditor
Guarantee Agreement
User
Services Tariff
BroadbandServices
AvailabilityPayment
RegressAgreement
PPP STRUCTUREPROJECT SCOPE
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Challenges for Enabling Environment
Human Resources Capacity Constraint
• Developing financing structure models;
• Knowledge management (lessons learned & best practices).
Institutional and Financial Arrangement
• Moving from current models of parallel financing to actual blended
financing.
• Budgeting mechanisms which allow for government funding to facilitate
blended finance.
• Asset management.
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Building Initiatives and Potential Areas for the Blended Finance
Target 2025
23%
Indonesia has committed to increase to 23% the renewable part
of the country’s energy mix by 2025,
• tremendous investments are required • the private sector has an instrumental role to play
11Some Notes and Thoughts on Blended Finance Practices and How to Make It Works in Indonesia
Blended Finance Projects are arranged and initiated not by Government and not involved
State Budget.
There is a perception that (i) Blended Finance is only SDGs related Agenda; (ii) Blended
Finance is about financing for big investment projects.
We may start Blended Finance practice in local, small and social project to
support the Government/Local Government’s development programs.
The Government may initiate Blended Finance through facilitation of
development cooperation/ODA funding scheme.
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Example of Blended Finance through Bilateral Development Cooperation Project ;MCC Grant Fund and Private Developer
Majelis Wali Amanah/MWA (Board of Trustee)
Pengelola Dana Amanah/PDA (Fund Manager)
Lembaga Wali Amanah
Communityowned
Company
Off GridPower Plant
SPV Operator
51%
49%
Private Developer
BMN as the project
results are donated
to the operator
Grant Fund
Grant Fund 96%
Project Values
Private Contribution :
4% (cash and/or in
kind)
Notes:1. Selection of the company through call for propoosal selection and due dilligence.
2. Transfer of assets to SPV is regulated by Ministry of Finance Decree
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8x10 m2 8x10 m2
Funding Support for
• Sports infrastructure
procurement
• Sports Equipment
Procurement
Definition of equipment
requirements and
selection
Financial support for
community development and
ESIA studies
Implementing partner:
• ESIA studies
• Spatial design
Training, Guiding
brainstorming, Capacity
Building
Land preparation
Example of Blended Finance in Local Social Project; Provision of Community Sport Facility
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