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Wednesday, 29 August 2012

Islamic Finance May Help Develop Indonesia Infrastructure

(The following was released by the rating agency)
SINGAPORE (Standard & Poor's) Aug. 28, 2012--Islamic finance could be a viable option to help Indonesia meet its ambitious infrastructure plans, according to an article that Standard & Poor's Ratings Service released today, titled "Islamic Finance Could Plug The Gap In Indonesia's Infrastructure Funding."
"We believe Indonesia can emulate Malaysia's success thus far in utilizing Islamic finance for infrastructure development. This is due to Indonesia's large infrastructure development needs, the government's willingness to attract private capital to fund these investments, and the rising demand for investable assets of a growing domestic Islamic finance market," said Standard & Poor's credit analyst Allan Redimerio.
The report says that the poor state of Indonesia's infrastructure is hindering the growth potential of South-east Asia's largest economy. Indonesia plans to spend more than US$200 billion to upgrade and expand its infrastructure from 2010-2014, with the private sector likely to meet 30%-40% of the investment. The government is mulling over various financing alternatives to fund the rest.
The report examples the successful contribution of Islamic finance to Malaysia's infrastructure development and the obstacles to similar adoption in Indonesia.
"We believe the lack of recognition for beneficial ownership and tax incentives is impeding the growth potential of this funding source. Ways to generate interest in this sector include offering a range of products to the population with support from the country's political, corporate, and financial institutions," said Mr. Redimerio.
(Reuters / 28 August 2012)

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