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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