Nusa Dua, Bali (ANTARA News) - Bank Indonesia said takeover by the private sector of most of the massive infrastructure projects will also carry risk such as risk in exchange rate, but the risk could be forestalled with diversification of hedging.

Governor of Bank Indonesia (Central Bank) Perry Warjiyo said in an Indonesian Infrastructure Forum, that new paradigm in infrastructure development, to be carried out with greater involvement of the private sector, will carry risks in exchange rate, liquidity and interest rate.

The risks would be faced by private investors especially those using large loans in foreign exchange to finance infrastructure projects, Perry told the forum, which is part of the series of meetings highlighting the Annual Meeting of the International Monetary Fund and the World Bank, now underway here from Oct 8 to 14.

"One commitment of the Central Bank related to infrastructure program is to ensure management of market risk in financing. Don`t forget, we are not new with foreign exchange swap," he said in a forum which will involve 21 state owned companies to absorb investment of around Rp200 trillion to finance infrastructure projects.

He said new attempt in hedging by the private sector had also come to existence with the Domestic Non-Deliverable Forwards (DNDF).

"We already introduced DNDF as an instrument to improve management of currency risks," he went on to say.

In order to mitigate interest risk from foreign exchange, the Central Bank is developing Overnight Index Swap (OIS), which will be benchmark interest rate in financial transactions, he said.

"There would be benchmark for one month, three months and longer terms," he said.

In coping with liquidity risk, the Central Bank cooperates with the Financial Service Authority (OJK).

Chairman of OJK Wimboh Santoso said it is impossible to rely only on bank credits to cover the Rp5,500 trillion needed to finance the country`s massive infrastructure projects in five years until 2019.

New method of financing, therefore, is needed such as through securitization of assets or "green bond", Wimboh added.

Reporting by Indra Arief Pribadi
Editing by Bustanuddin

Reporter: antara
Editor: Heru Purwanto
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