• New Investment Instrument
Article:

New Investment Instrument

31 October 2017

Financial Services Authority (OJK) expressed that the government have high hopes from the capital market industry to respectively support the domestic infrastructure development by having to have the long term fundings.

The large amount of funding needed to encourage national infrastructure development has pushed the OJK to set a special investment product to fund public infrastructure projects.

The OJK is performing a study to issue new investment instruments as follows:

• Infrastructure Fund: to gather funding from the investor;

• Infrastructure Bond: to gather funding based on infrastructure project;

• Project Bond: investment instrument which source of payment to investor is derived from the project’s revenue.

The regulation related to infrastructure fund is being matured by the OJK and will be issued in the near future. OJK also plans to add the investment instrument in the capital market for the purpose of funding the infrastructure in the form of Collective Investment Contract (KIK). The plan to create such instrument can be seen in the OJK Regulation (POJK) provision regarding the Funding of Infrastructure Investment.

Key Information related to Collective Investment Contract (KIK):

• Assists to raise public funding in infrastructure assets which shall be offered through public offerings or without public offerings by investment managers.

• KIK allows investment of the funding to infrasctructure asset directly without using a special purpose company. The investment portfolio shall only be made in the form of infrastructure asset with the minimum of 51% from the Net Asset Value (NAB) and other asset with the maximum value of 49%.

• KIK is required to be located in Indonesia and invested in the form of infrastructure asset which support the development program, or government infrastructure fundings, or bring benefits to the public. Besides, the other type of assets allowed may consist of money market instrument of portfolio of securities.

• KIK may be issued using IDR currency or other foreign currency.

• The Initial NAB of infrastructure investment fund must be set at Rp 1,000 for Rupiah currency and US $1 or  EUR1 for other foreign currency.

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