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PT Bank Mandiri (Persero) Tbk : Mandiri Investasi to Target Infrastructure With First Private-Equity Funds

07/02/2012 | 02:06am US/Eastern
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   By Caroline Henshaw and Andreas Ismar 
 

One of Indonesia's largest investment managers, Mandiri Investasi, plans to launch its first ever private-equity funds in a bid to capitalize on a relaxation in the country's land ownership law.

Mandiri Investasi Chief Executive Abiprayadi Riyanto said Monday that the investment arm of Indonesia's biggest lender by assets, Bank Mandiri (BMRI.JK), is working to raise capital for several infrastructure-focused funds over the next two years.

The fund manager has already received interest from pension funds looking to tap into Indonesia's burgeoning infrastructure sector after its parliament in December passed a long-anticipated bill to quicken the process by which the government buys land for public projects, he added.

"We see this as a good chance to expand our business more vigorously by launching private equity funds given our expertise in the mutual funds industry," he said, but declined to provide more details.

"With the land bill that has been approved by the house of representatives, we expect it will get infrastructure projects running faster."

Indonesia is one of Asia's fastest-growing economies and is quickly becoming one of the world's hottest destinations for global investors after it regained its investment-grade sovereign rating last year for the first time since the Asian financial crisis.

Foreign direct investment in Indonesia grew 20% to a record $20 billion last year as companies invested in areas like coal mines and car factories to tap the country's vast natural resources and 240 million-strong consumer market.

The passage of a new law that will set a time limit for infrastructure projects to be completed and establish a legal process through which landowners and community members opposed to these projects can be heard has also opened up the sector to international investors. The lack of such a framework has previously led to long delays in building infrastructure, while buying land for the projects can take five years or more.

The Indonesian government is now drafting regulations required to implement the law to be approved by President Susilo Bambang Yudhoyono.

"There is [an] increasing interest from overseas funding in Indonesian infrastructure, supported by the recent investment-grade rating that helped increase investor confidence in the Indonesian economy," Mr. Riyanto said.

Mandiri Investasi itself has been active in seeking foreign capital. Last year the fund manager formed a partnership with Melbourne-based AFM Investment Partners to tap Australian institutional investors' appetite for investing in Indonesian stocks.

Mr. Riyanto said he expects Australian institutions--particularly pension funds in the country's 1.3 trillion Australian dollar ($1.33 trillion) superannuation industry--will have an appetite for its private-equity funds, given their traditional appetite for domestic infrastructure investments.

"So far, pension fund investors have shown interest in this project as we believe this investment can provide a higher return compared to deposits," he said.

Indonesia's president arrived in Australia Monday for a three-day trip designed to improve bilateral relations and increase their combined A$14.8 billion trade.

Write to Caroline Henshaw at caroline.henshaw@dowjones.com and Andreas Ismar at andreasismar.sandiwan@dowjones.com

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