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Sun, 26 October 2014 02:26:37
Islamic finance can fund Indonesia's infrastructure plans: S&P
30 Aug, 2012 12:55:04
Aug 30, 2012 (LBO) – Islamic financing could help Indonesia, the largest economy in South-East Asia to keep its infrastructure plans on track, a Standard and Poor's report has shown.
The S&P rating agency says Islamic financing could be a viable option for Indonesia to bridge gaps in funding major infrastructure development projects just as Malaysia did.

"This is due to Indonesia's large infrastructure development needs, the government's willingness to attract private capital to fund these investments, and the rising demand for investable assets of a growing domestic Islamic finance market," S&P's credit analyst Allan Redimerio was quoted as saying.

The report assesses the successful contribution of Islamic finance in Malaysia's infrastructure development and obstacles of adopting a similar system in Indonesia.

"We believe the lack of recognition for beneficial ownership and tax incentives is impeding the growth potential of this funding source," the S&P statement said.

"Ways to generate interest in this sector include offering a range of products to the population with support from the country's political, corporate, and financial institutions," Redimerio said in the statement.

S&P says Indonesia's poor state of infrastructure is obstructing growth and ambitious plans have been drawn up for a major infrastructure development drive.

Indonesia plans to spend more than 200 billion dollars to upgrade and expand its infrastructure during 2010-2014. S&P says the private sector is likely to meet 30 to 40 percent of the investment while the government is mulling alternative ways to fund the rest.

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