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Govt eases asset recycling rule to solve infra financing, but pricing is tricky
Experts believe that investors may only agree to invest in LCS projects if offered significant discounts, potentially leading to financial losses for the country.
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The Trans-Papua road is seen in an undated photo. (Hutama Karya/-)
T
he government has eased a rule that allows private entities to purchase long-term operational rights to assets owned by the government or by state-owned enterprises (SOEs) for a long period of time in a move to close the infrastructure financing gap in the country.
The arrangement, called the limited concession scheme (LCS), is set to generate money that later could be channeled to fund the development of new infrastructure projects without a need to increase debt and taxpayer money. The World Bank classified this scheme as asset recycling.
Assets applicable under this scheme include toll roads, ports and airports that are typically already built and operational.
Investors could collect revenue from customers until the concession period ends, at which point they must return the assets to the government.
Coordinating Economic Minister Airlangga Hartarto on Aug 28 hailed the scheme as a form of “creative alternate financing”, as it could boost private participation in infrastructure development, while alleviating the burden on the state budget.
The government set a regulation for the LCS through Presidential Regulation No. 32/2020 four years ago that it revised with Presidential Regulation No. 66/2024 this July.
Read also: Jokowi boasts of infrastructure, economic gains in final state address
