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Infrastructure and green bonds were being considered to help come up with the billions of dollars needed to develop the ailing sector, a senior government adviser said on Thursday.

The country needs $140 billion over the next five years in infrastructure development, ranging from paving roads and highways to providing more power and water supplies nationwide.

As much as two-thirds of that amount would have to come from the private sector, said Edward Gustely, a government adviser.

“I’ve been in discussions on infrastructure bonds and green investment bonds and again, it’s a combination of the ability to tap into institutional capital that is looking to participate in this,” he said on the sidelines of an investment conference in Hong Kong, but added that no details had yet been decided.

“It’s being studied both by the government and the private sector.”

In India, the government plans to issue tax-free infrastructure bonds with a minimum tenure of 10 years to help fund the construction of roads, ports and power plants, a scheme that Indonesia is studying.

Emerging Asian countries, such as China, India and Indonesia, have been trying to boost their infrastructure to help accelerate economic growth and manage fast-expanding cities, where hours-long traffic jams are common.

Shortages in the power supply would also mean frequent outages in industrial towns, hampering factory output and incurring costs for investors.

“The lack of infrastructure over the next few years is the only [thing], in my assessment, holding back Indonesia,” Gustely said.

“If you’re a plastics manufacturer, the last thing you want is a power outage that costs you money. We’ve got an issue with power generation, and that affects the industrial aspects of Indonesia.”

Indonesia’s economy is expected to expand by 6 percent this year and 6.3 percent in 2011, then reaching as much as 7.7 percent by 2014, officials have said, but the levels still lag behind regional giants China and India.

Indonesia has been trying to attract more foreign investors to pour money into its infrastructure, but some global institutions are concerned about regulations and practices when investing there compared to countries such as China and India.

There is still a lot of infrastructure that needs to be developed throughout Indonesia. According to Gustely, only 53 percent of the country’s population has access to electricity from power grids, and only a third have piped water.

The nation’s capital and financial center, Jakarta, is also overcrowded, set in an earthquake zone, prone to flooding and crippled by inadequate infrastructure. “Every year we fail to [fix the situation], we lose time and the situation gets worse,” Gustely said.


Reuters