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China-backed AIIB offers to help fund Indonesia's capital relocation

China-backed AIIB offers to help fund Indonesia's capital relocation

Asian Infrastructure Investment Bank (AIIB) President Jin Liqun attends a news conference at the AIIB headquarters in Beijing, China, Aug 31, 2016. (Photo: REUTERS/Thomas Peter)

JAKARTA: The Asian Infrastructure Investment Bank (AIIB) is prepared to help finance Indonesia's plan to move its capital from congested Jakarta to an area on the eastern side of Borneo island, the president of the Beijing-backed bank said on Tuesday (Nov 26).

Indonesia has said its plans to build a new capital in forested Borneo will require a US$33 billion investment based on early designs, which it hopes to finance from both state coffers and private sector involvement.

"If they would like us to be involved in developing the new capital, I'm very happy to do that," AIIB President Jin Liqun said in an interview in Jakarta on the sidelines of an infrastructure forum co-hosted by the bank.

Jin extended the same offer to Finance Minister Sri Mulyani Indrawati when they spoke at the forum, though he cautioned that the government should avoid creating another city like Jakarta, which is overcrowded and sinking due to over-extraction of groundwater.

Indrawati welcomed his offer, though said it would take time for the government to propose any such loan as it is still waiting for the results of a feasibility study by McKinsey & Company.

Getting funding from multinational development banks "is good, in terms of not only funding but also introducing good principles," she told reporters.

Indonesia aims to begin construction of the new capital in 2021 and 1.5 million civil servants are expected to start moving by 2024.

The AIIB is also considering financing a satellite project in Indonesia to boost internet speeds for some 45 million people in remote areas, where fibre optic infrastructure is expensive to build, an executive at the bank said.

Another area where the AIIB was looking to help finance was inter-island transport, Jin said. Indonesia has more than 17,000 islands across an area wider than the distance between London to Moscow.

The AIIB expects 30-35 per cent growth every year in its overall lending programme for some years, Jin said, adding that by the end of 2019 its outstanding credit would reach more than US$4 billion, compared to US$3.4 billion at the end of 2018.

Jin said the AIIB would promote renewable energy projects, such as hydro power plants and the use of smart grids in electricity transmission, but drew a line under financing coal power.

"We don't finance coal power plants and there are no projects in our pipeline," said Jin.

"And with the enhanced efforts of the international community to phase out coal, I don't think we ever will." 

Source: Reuters/ec


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