Government Hints Subsidy On Infrastructure Credit Interest Rate

Jakarta (Antara Bali) - Finance Minister Bambang Brodjonegoro has indicated that the government may offer subsidy on credit interest for infrastructure projects.

The credit would be provided by a new financing agency yet to be established -- the Indonesian Development Financing Institution (LPPI).

In a national working meeting of the Indonesian Chamber of Commerce and Industry (Kadin) on Monday night, the minister said the interest subsidy  could be offered by LPPI as an incentive to accelerate infrastructure development.

The lending rate of LIPI is lower than the commercial credit rates of banks, he said.' "The government, therefore, has to inject fresh fund into the agency every year," he said.

He said he had kept the idea for quite a long time, adding the  government is  processing a draft law  on LIPPI.

He said LIPPI is similar to the defunct Indonesian Development Bank (Bapindo), which had merged with three other state banks to form Bank Mandiri.

However,  LPPI would not follow the track of Bapindo, which was beset by corruption  and mismanagement, he said.

LIPPI would not operate as a commercial bank and it would be focused on financing infrastructure projects, he said.

He said LIPPI would operate like the World Bank or the Asian Development Bank (ADB) for infrastructure in Indonesia.

However, he did not rule out the possibility of LIPPI providing credits to support  development of the industrial sector and to finance trade.

Currently the government has a company  PT. Sarana Multi Infrastruktur (SMI) under the finance ministry.

The government has a capital participation of Rp20.3 trillion in SMI , which also operates to finance infrastructure development especially in eastern Indonesia.

"Infrastructure is a main pillar of economic development  and high in priority in the government development program," the minister said. (WDY)