Jogja City

Indonesia’s vice president has urged the country to create a national development bank to provide long-term financing for state projects, a minister said Monday.

Sugiharto, Indonesia’s Minister for State Enterprises, told reporters that Vice President Jusuf Kalla had said a national development bank could provide multi-year financing for infrastructure projects more effectively than foreign lenders.

“The vice president asked that ideas regarding a development bank be studied, as in almost all the rest of the world there are banks which are owned by the state and give multi-year financing,” he said, following a meeting with Kalla to discuss the performance of state-owned enterprises.

Kalla was not available for comment following the meeting.

In a recent report, the World Bank said improved export earnings on commodities and reduction of heavy subsidies on domestic fuel sales have helped improve Indonesia’s macroeconomic conditions to their best position since the Asian financial crisis.

But Indonesia’s external debt remains high - the most recent Bank Indonesia figures showed outstanding external debt of $128.4 billion in the third quarter of 2006.

The cash-strapped administration of President Susilo Bambang Yudhoyono says it can’t afford to develop much-needed infrastructure on its own, and has had little success attracting foreigners to invest in projects like toll roads and ports.

When asked whether a national development bank could be formed from a conglomerate of state-owned banks, Sugiharto said that possible methods to create a national development bank “had yet to be discussed.”

“It will need extraordinarily comprehensive research, and we must work in tandem with the regulations of Bank Indonesia regarding banking structure in Indonesia,” he said, without elaborating.