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Making money from motorways

2017-09-25 08:25:14

Indonesia’s government has sold the income from its oldest motorway as part of a novel way of financing infrastructure upgrades.

On August 31 the state-owned motorway operator, Jasa Marga, raised 2 trillion rupiah (AUD 186 million) by selling toll income from a 60km-stretch of road linking Jakarta to cities in Western Java.

Other countries have used similar “securitisation” schemes—where a company sells future income from an underlying asset such as motorway tolls to investors—to generate cash for infrastructure upgrades.

But the securitisation of tolls on the Jagorawi motorway, opened by President Suharto in 1978, is the first of its kind in Indonesia.

The ‘Future Revenue Based Security’ allocates 70% of the road’s annual toll revenue to investors over the next five years. Investors included the state’s pension fund, health insurer BPJS Kesehatan, and transport accident and life insurer PT Jasa Raharja.

It represents a significant step forward in the government’s efforts to bridge the infrastructure funding gap.

Chair of the Financial Services Authority, Wimboh Santoso, has also encouraged companies to seek long-term funding sources through securitisation schemes.

“This broke the egg and will hopefully be followed by other state?owned enterprises”, said Wimboh. 

AIPEG assisted the finance ministry’s fiscal policy agency, or BKF, in developing the securitisation products.

Along with on-the-job support for finance ministry officials, in April 2017 AIPEG hosted a roundtable with government officials, directors of state enterprises and private investors. This month, a follow-up discussion is targeting international investors.

“Market interest in these schemes is high, especially after momentum generated by President Jokowi at Indonesia’s capital markets anniversary last month” said Celly Pertiwi, AIPEG Senior Economist.