Proposes knowledge-sharing among policymakers and market participants to increase awareness and demystify misconceptions of using credit guarantees for infrastructure in Indonesia
Recommends exploring the development of new guarantee products specific to Indonesia, based on a deep understanding of market needs
JAKARTA, Indonesia, March 3, 2025 /PRNewswire/ — GuarantCo, part of the Private Infrastructure Development Group (PIDG), has published an insightful new Indonesia Market Report on Credit Guarantees (“Indonesia Market Report”). The report explores how credit guarantees can be used to mobilise private investment into the country’s critical sustainable infrastructure projects.
The report is based on new data analysis and illustrated by case studies of how this strategic approach has been used successfully by GuarantCo in other emerging markets across Asia.
The report was launched at an exclusive PIDG Institute event, hosted in partnership with Infrastructure Asia, at the Ritz-Carlton Jakarta last night. The event was attended by key stakeholders in Indonesia’s infrastructure sector such as policymakers, investors, and project developers.
Indonesia, the largest nation in Southeast Asia by population and landmass, stands at a critical juncture in its pursuit of sustainable infrastructure development. With a commitment to achieving net-zero emissions by 2060, the country is presented with both opportunities and challenges in achieving its long-term infrastructure goals.
A significant funding gap necessitates more innovative financing solutions. Infrastructure financing in Indonesia is highly dependent on public funds, with 37 per cent expected from the state budget and 21 per cent from state-owned enterprises, based on RJPMN 2020-2024 over the previous period. Private investment, covering the remaining 42 per cent of total needs, is key to sustaining infrastructure development. The private sector has significant potential to play a transformative role in bridging the financing gaps necessary to advance this nationally important agenda.
In the Indonesia Market Report, GuarantCo brings together analysis of the financing landscape, an evaluation of long-term debt credit options and assessment of market constraints to build a comprehensive vision for a way forward. The report is designed to be a practical resource to empower stakeholders with insights and strategies to engage blended finance players from the public and private sector in this critical mission.
The report highlights credit guarantees as one such innovative financing solution, which can more efficiently blend financing instruments to leverage larger amounts of private capital using public funding. Credit guarantees can play a vital role in unlocking new capital pools for infrastructure financing and offering an alternative approach for risk mitigation.
The report provides four recommendations, inviting further engagement amongst stakeholders to more effectively utilise this innovative financing product:
Conduct knowledge-sharing among policymakers and market participants to increase awareness and demystify misconceptions of using credit guarantees for infrastructure in Indonesia
Explore the development of new guarantee products specific to Indonesia, based on a deep understanding of market needs
Create partnerships with international and national guarantors to share guarantee capacity, knowledge and leverage each other’s unique strengths and knowledge
Engage in policy dialogue on guarantees to foster open communication and shared understanding on a way forward for development of credit guarantee markets for infrastructure.
British Ambassador to Indonesia Dominic Jermey said: “Mobilising private investment is essential to financing Indonesia’s sustainable infrastructure, as well as delivering economic growth and climate-resilient development. As a major funder of PIDG, the UK is delighted to see GuarantCo helping to unlock more private capital in Indonesia through innovative financial mechanisms, boosting investor confidence and enabling finance to flow. Together with our sustainable infrastructure platform, MELAJU, recently launched in Jakarta, the UK is working alongside Indonesia to deliver high-quality, bankable infrastructure projects that create jobs, benefit communities, promote equality and drive long-term prosperity.”
Philippe Valahu, CEO of PIDG and Chair of the GuarantCo Board, said: “The development of sustainable infrastructure is pivotal to bolstering economic growth and promoting equality in Indonesia. The Government has rightly prioritised this sector, resulting in significant improvements in both the quantity and quality of new infrastructure in recent years. There is a great opportunity for private capital to be mobilised to support these efforts. Our PIDG Institute event and the GuarantCo report are designed to help address existing barriers to accessing capital for sustainable projects and dramatically increase Indonesia’s global competitiveness in this regard.”
Nishant Kumar, Managing Director of Asia Investments at GuarantCo, said: “We have a wealth of experience in employing innovative credit solutions to help close the infrastructure funding gap by crowding in private capital. This report builds on our proven expertise across Southeast Asian markets, including Vietnam and Cambodia, and explores how these insights can be applied specifically to accelerating sustainable infrastructure development in Indonesia.”
Lavan Thiru, Executive Director of Infrastructure Asia, said, “We are pleased to co-organise the event with PIDG and extend our congratulations on the successful report launch. The report offers valuable insights on the use of innovative financing mechanism, such as credit guarantees, to mobilise private capital and bridge the funding gap. At Infrastructure Asia, we are committed to fostering strategic partnerships between public and private stakeholders to enable the co-development and financing of sustainable infrastructure across Asia. By working with trusted partners like PIDG and GuarantCo, we can unlock the potential of Indonesia’s infrastructure sector and contribute to its continued economic and social growth.”
The Indonesia Market Report is available to be downloaded here.
