Making infrastructure projects more investable

Adelia Pratiwi and Dwinanda Ardhi Swasono
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PREMIUM

Jakarta / Mon, March 23, 2020 / 01:27 pm

Making infrastructure projects more investable

Construction workers digging an 8-kilometer long headrace tunnel that will channel water from the Asahan river to the turbines of the Asahan III hydropower plant in North Sumatra. (PLN/PLN)

Infrastructure development remains the government’s top development priority in 2020. McKinsey Global Institute estimated a cumulative infrastructure gap of US$5.5 trillion until 2035, both for developed and emerging economies. With fiscal rules and global economic downside risks, creative financing for infrastructure should be explored. The first solution for such constraint is actually through budget reallocation. This was already applied by the government in 2015 when a significant amount of energy subsidy was rationalized and reallocated for infrastructure projects. The money was used by the government to inject capital into state-owned enterprises (SOEs). Although this method successfully increased SOEs’ infrastructure financing capacity by nearly three times due to leveraging, Indonesia still needs to mobilize more financial resources into the infrastructure secto...