Indonesia is prepared to contribute at least $300 million to a new Islamic infrastructure bank that the Southeast Asian nation will co-found with Turkey and a Saudi-based multilateral lender, the country's finance minister said on May 26. The idea for the proposed bank comes as Asian nations seek to boost cross-border lending for infrastructure, with China taking the lead with its Asian Infrastructure Investment Bank (AIIB).
Improving Indonesia's creaking infrastructure is one of President Joko Widodo's main priorities. In his first budget in February, Widodo allocated 290 trillion rupiah ($21.96 billion) for capital spending.
"It will be like an infrastructure bank, but with a sharia approach, with the republic of Indonesia, Turkey and the Islamic Development Bank (IDB) as founding members," Indonesia's Finance Minister Bambang Brodjonegoro told reporters.
Both Indonesia and Turkey have pledged to put at least $300 million into the bank. It was not immediately clear how much the IDB would contribute.
Turkey's Deputy Prime Minister Ali Babacan said the bank would be a "megabank", the country's state Anadolu Agency reported last week.
Indonesia has said it needs $455 billion during Widodo's five-year term to upgrade dilapidated facilities, and multilateral lenders have offered to provide more funds to the country.
On a visit to Jakarta last week, World Bank President Jim Yong Kim offered up to $12 billion in new financing to 2019.
Indonesia also plans to form a separate state-owned infrastructure bank, and it wants to play a big role at the AIIB, from which the country is expected to receive major funds.
The AIIB is also discussing with the IDB the use of Islamic financing as part of its lending tools, the IDB's president Ahmad Mohamed Ali told Reuters.