JAKARTA • Indonesia's financial regulator has changed its rules governing investments by non-bank financial institutions, according to a new regulation signed last week, in a move aimed at getting those firms to support government infrastructure projects.
The Otoritas Jasa Keuangan (OJK) revised a regulation first implemented in January last year that required insurance companies, pension funds and other non-bank financial institutions to keep a minimum percentage of government bonds in their portfolio to help provide stability to the debt market.
In the revised version, the OJK has expanded the options for required investment products to include instruments issued by state- owned companies and their subsidiaries used to finance government infrastructure projects.
The new list of instruments includes asset-backed securities, as well as so-called limited-participation mutual funds, according to the regulation signed last Tuesday, which took effect immediately.
The government is trying to create a market for such instruments. Last week, state-controlled toll road operator Jasa Marga sold 2 trillion rupiah (S$203 million) of securities backed by future revenue from one of its toll roads.
Other state-owned firms aim to similarly raise funds as part of a presidential drive to get US$10 billion (S$13.6 billion) in additional inflows, capitalising on Standard & Poor's May 19 upgrade of the country's credit ratings to investment grade.
Accelerating infrastructure projects is among the main focuses of Indonesia's government and project financing is one of the main hurdles.
The World Bank estimated that South-east Asia's largest economy would have to spend US$500 billion to meet its infrastructure needs in the next five years and public spending alone would not be enough.
The overall amount of government-linked securities the OJK requires non-bank financial institutions must keep as a minimum percentage of their investments remains unchanged from last year.
Such securities must make up at least 30 per cent of pension funds' and life insurance companies' investments, and 20 per cent of general insurance firms' investments.