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Jakarta Post

Government seeks more private investment in infrastructure

The government is aiming to develop more infrastructure projects through public-private partnership (PPP) schemes next year, promising a bigger role for the private sector

The Jakarta Post
Jakarta
Fri, December 18, 2015

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Government seeks more private investment in infrastructure

T

he government is aiming to develop more infrastructure projects through public-private partnership (PPP) schemes next year, promising a bigger role for the private sector.

National Development Planning Minister Sofyan Djalil said he expected to push ahead with at least four infrastructure projects for 2016 under the PPP scheme, namely the Balikpapan-Samarinda toll road in East Kalimantan, the Manado-Bitung toll road in North Sulawesi, the Umbulan water supply project in East Java, as well as a water supply system in Bandar Lampung, Lampung.

Sofyan acknowledged that only 10 percent of the total PPP projects on the government'€™s list could proceed according to plan because of various problems, including regulations and the preparedness of the projects, among other factors.

He said many projects had stalled, such as the long-delayed Umbulan water-supply project that already received a financial guarantee from infrastructure project financing guarantee agency PT Penjaminan Infrastruktur Indonesia (PII).

The project, which was part of a national showcase project in 2010, would require around Rp1. 8 trillion (US$128.7 million) in investment.

The Finance Ministry has recently given a push to the long-delayed project by providing viability gap funding (VGF) amounting to Rp 823 billion. VGF allows the government to allocate state funds to cover up to 40 percent of the total value of an infrastructure project using a PPP scheme.

The National Development Planning Board (Bappenas) 2015 PPP projects book lists 38 projects under the scheme with 22 projects still in the tender process, including a 2,000 MW coal-fired power plant in Central Java and the Serpong-Balaraja toll road in Banten.

Sofyan stressed that the government would need the private sector for its long-term development of infrastructure as it had limited financial and other capacities.

The government previously estimated that the total funding needed for infrastructure projects over the next five years would hit Rp 5.5 quadrillion. The government was expected to be able to fund less than a quarter of these through the state budget, with the gap intended to be filled by PPP schemes.

National Land Agency (BPN) government land management and procurement director Noor Marzuki said the government was striving to attract more private investors. Therefore, it would soon revise an Agrarian and Spatial Planning Ministry regulation related to land procurement for public infrastructure that was previously established in Presidential Decree No. 30/2015.

The new regulation would detail schemes allowing a bigger role for private investors to procure land using their own funds and various means for the government to repay the investors.

According to Noor, the government could pay back after the land-procurement process was complete, or if there were insufficient funds to repay the investors they could consider the procurement as their own.

'€œThey could even operate a toll road for longer, as the actual infrastructure development and the land procurement would be theirs,'€ he said. He added that with the policy, he expected infrastructure development to proceed faster.

Another facility offered to the private sector would be infrastructure project guarantees, including from the PII, to mitigate risks, which are often overlooked and create uncertainty among investors.

The PII is reported to have provided guarantees for as many as seven projects in 2015 amounting to around Rp 65 trillion including the Palapa Ring cable network project amounting to $450 million and the South Sumatra mine-mouth power plant amounting to $4 billion. (fsu)

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