Despite speculations that ASEAN economies will be severely affected by the global economic downturn by next year, Maybank , ASEAN’s fourth largest bank by assets is optimistic that economic growth in the region will still be strong over the next three to five years.
Maybank Kim Eng Group Chief Executive Officer John Chong said the bank believes that the fundamentals of ASEAN are strong and growth is expected to hit around five per cent this year.
“We believe that ASEAN’s fundamentals are strong and there are lots of opportunities here, and we are looking at about 5.2 to 5.3 per cent growth over the next three to five years and hence the reason we are holding the Invest ASEAN conference for Maybank,” he said.
Maybank is organising the one-day Invest ASEAN 2016 conference themed ASEAN’s Next Wave: Building The Infrastructure of Opportunity in Jakarta.
Chong said banks will continue to be the traditional funding source and the capital markets could offer a possible alternative.
“Both the bond and equity capital markets in Indonesia are relatively under-leveraged compared to the other markets in ASEAN and have significant capacity to fund some of these projects.
“Bonds, in particular, allow project sponsors to better match their financing cost with the Indonesia Rupiah receivables received from these projects, which normally have long gestation periods,” he said.
Chong said Maybank Kim Eng is already actively supporting infrastructure financing needs in Indonesia, having recently acted as the Sole Lead Arranger for a US$300 million Onshore USD MTN Programme for PT Sarana Multi Infrastruktur (Persero), the state-owned enterprise mandated to accelerate the provision of national infrastructure funding.
Maybank Kim Eng also acted as the Exclusive Financial Advisor and Mandated Lead Arranger for PT Mabar Elektrindo’s financing of its maiden 300MW coal-fired power project located in Medan, Indonesia.
“We expect there will be increased issuance in the medium term as more infrastructure financing projects get underway and demand for financing picks up,” he said.
Meanwhile President Director of Maybank Indonesia Taswin Zakaria said Indonesia’s infrastructure capex is estimated to reach US$264 billion for the 2016–2020 period, equivalent to 30-35 per cent of the country’s GDP.
He said that the current macro environment in Indonesia is very supportive of infrastructure development, which is urgently needed in the country.
“Low interest rates allow for cheaper funding for infrastructure projects, inflation has been steady at around 3.5-4.0 per cent in the last two years and the Rupiah has also stabilised.
“On the fiscal side, the Indonesian government has managed to keep the budget deficit to GDP ratio at below three per cent. Furthermore, the government has been rolling out regulations to hasten implementation of infrastructure projects,” he said.
Taswin said Maybank expects about 70 per cent of the total capex or USD190 billion to come from private funding with the remaining 30 per cent to be provided by the government.
“The government’s focus on infrastructure development will also reduce logistics costs, help the lower-income groups increase productivity, and narrow the income gap.
“We expect this to spark strong growth in Indonesia’s mass market consumer sector over the next decade,” he said.