In order to cut bureaucratic lines and in a bid to further smoothen the process for bidding and project implementation, the government has agreed to name  the Investment Coordinating Board (BKPM) as the only agency authorized to process investment permits for the PPP projects.  

“Under the new mechanism, investors may get their investment permits through quicker, simpler and more efficient procedures.

They don’t have to process the permits through different offices as before,” said BKPM chairman Gita Wirjawan at a press conference on Wednesday, after the signing of a memorandum of understanding (MoU) between his office, the Finance Ministry, and the National Development Planning Ministry.

Under the MoU, which was signed by Gita and his two counterparts, Finance Minister Agus Martowardojo and National Development Planning Minister Armida Alisjahbana, the three government offices agreed to give the BKPM full authority over PPP projects.

According to the BKPM, five soon-to-be-auctioned projects include a power plant, an oil refinery, a port, an airport and a railway line.

“It’s still a rough estimation. But it may be enough for us to start with just five projects,” he said, while mentioning the PPP mechanism would hopefully support the government’s aim of attracting Rp 1,000 trillion (US$111 billion) worth of investments for the development of, among others, 20,000
kilometers of roads and several power plants.

“With just three or four achievable projects, we can boost our credibility direly needed to increase both our investment rating and economic performance,” Gita said.

BKPM estimates the government would need up to Rp 1,500 trillion for the infrastructure development for the period between 2010 and 2014. “The government will allocate Rp 500 trillion to Rp 600 trillion from its state budget. So, we still need about Rp 900 trillion to Rp 1,000 trillion from the private sector,” Gita said.

 He said it would be difficult for the government to attract Rp 1,000 trillion from the private sector if the government did not change investment procedures to provide financial incentives and ensure legal certainty.

Apart from simple investment procedures, appropriate regulations would be needed to create a better investment climate currently hamstrung by various problems, including those surrounding land acquisition.

“I hope we can have a law passed on land development for public use in the near future,” Gita said.

Finance Minister Agus Martowardojo said his office has helped established a number of companies to support the infrastructure development.

First, PT Pusat Investasi Pemerintah (PIP) has been tasked with providing funds for infrastructure development projects. Second, PT Penjaminan Infrastruktur Indonesia (PII) will provide guarantees, including political guarantees. Finally, financing support will be provided by, among others, PT Sarana Multi Infrastrukture (SMI), which is ready to finance projects with limited funds.

In a greater role, PT SMI has established a specialized infrastructure financing agency, PT Indonesia Infrastructure Finance (IIF), to accelerate infrastructure development in Indonesia, in cooperation with the World Bank, the International Finance Corporation, the Asian Development Bank and DEG from Germany.   

IIF will provide infrastructure financing for longer periods than conventional banks can to provide. (ebf)

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