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Jakarta 27 March 2008 ¿ OSK Investment House (Malaysia) Berhad (KFHMB) participated in a conference to explore and discuss various approaches, funding sources and relevant financing structures ¿ whether Shariah-compliant or conventional - for infrastructure development in Indonesia.
Over the next five years, Indonesia will need massive infrastructure-related spending of over US$150 billion. However, since only 17% of this investment can be financed from the government's own resources, the administration has been actively encouraging the participation of both local and foreign investors in developing the country's infrastructure. The government renewed its appeal for private investment under its five-year infrastructure development program at the November 2006 Infrastructure Forum in Jakarta. With projects worth around US100 billion already in the pipeline, domestic construction industry is poised to experience robust growth, in line with economic expansion.
Recently, the government has strengthened its commitment to improve the country's infrastructure, and one of the major micro economic reforms announced recently is the accelerated construction of infrastructure throughout Indonesia. The country is building considerable momentum for infrastructure reform, and we forecast greater investment in the sector moving forward, as investment climate keeps improving.
Although the infrastructure sector of Indonesia seems to be on the right track, Challenges such as poor business environment, inefficient channelling of budget resources and insufficient disaster management capabilities need to be addressed.
Mr Annis Sheikh Mohamed, KFHMB's Head, Corporate & Investment Banking presented a paper entitled Project Finance: Islamic Financing Perspective. Annis was recently a recipient among the top 50 Most Promising Young Leaders in the banking and financial services industry in the Asia-Pacific and Middle East regions by the Asian Banker.
The presentation identified three key issues in Islamic financing in Indonesia. In relation to current laws, the recognition of asset sale under Islamic financing structures as true sale creates a challenge as there is no differentiation between beneficial and legal ownerships. Where taxation is concerned, current tax guidelines and accounting treatment on Islamic financing structures make it more expensive than conventional financing where incremental costs emerge from direct taxes, VAT and stamp duties. There is also an issue on the lack of depth and breadth in the market, where the introduction of incentives and revision in tax and regulations have been suggested to make it a more conducive environment for Islamic financing.
The one-day conference in Jakarta was themed The Next Wave in Infrastructure Financing ¿ Making Islamic, Public & Private Funds Work. Mr Suresh Menon, the Executive Director of RAM Holdings gave the welcome remarks whilst H.E. Dr Sri Mulyani Indrawati, the Minister of Finance of Indonesia gave the keynote address. Participants who attended the conference came from various fields among the investing community, industry practitioners from the accounting, legal and banking sectors and credit rating agencies.
Over the next five years, Indonesia will need massive infrastructure-related spending of over US$150 billion. However, since only 17% of this investment can be financed from the government's own resources, the administration has been actively encouraging the participation of both local and foreign investors in developing the country's infrastructure. The government renewed its appeal for private investment under its five-year infrastructure development program at the November 2006 Infrastructure Forum in Jakarta. With projects worth around US100 billion already in the pipeline, domestic construction industry is poised to experience robust growth, in line with economic expansion.
Recently, the government has strengthened its commitment to improve the country's infrastructure, and one of the major micro economic reforms announced recently is the accelerated construction of infrastructure throughout Indonesia. The country is building considerable momentum for infrastructure reform, and we forecast greater investment in the sector moving forward, as investment climate keeps improving.
Although the infrastructure sector of Indonesia seems to be on the right track, Challenges such as poor business environment, inefficient channelling of budget resources and insufficient disaster management capabilities need to be addressed.
Mr Annis Sheikh Mohamed, KFHMB's Head, Corporate & Investment Banking presented a paper entitled Project Finance: Islamic Financing Perspective. Annis was recently a recipient among the top 50 Most Promising Young Leaders in the banking and financial services industry in the Asia-Pacific and Middle East regions by the Asian Banker.
The presentation identified three key issues in Islamic financing in Indonesia. In relation to current laws, the recognition of asset sale under Islamic financing structures as true sale creates a challenge as there is no differentiation between beneficial and legal ownerships. Where taxation is concerned, current tax guidelines and accounting treatment on Islamic financing structures make it more expensive than conventional financing where incremental costs emerge from direct taxes, VAT and stamp duties. There is also an issue on the lack of depth and breadth in the market, where the introduction of incentives and revision in tax and regulations have been suggested to make it a more conducive environment for Islamic financing.
The one-day conference in Jakarta was themed The Next Wave in Infrastructure Financing ¿ Making Islamic, Public & Private Funds Work. Mr Suresh Menon, the Executive Director of RAM Holdings gave the welcome remarks whilst H.E. Dr Sri Mulyani Indrawati, the Minister of Finance of Indonesia gave the keynote address. Participants who attended the conference came from various fields among the investing community, industry practitioners from the accounting, legal and banking sectors and credit rating agencies.
