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Govt seeks more PPP funds for progress
Show of sympathy: International Monetary Fund managing director Christine Lagarde visits earthquake victims in Guntur Macan village in Gunungsari district, West Lombok, West Nusa Tenggara, on Monday
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how of sympathy: International Monetary Fund managing director Christine Lagarde visits earthquake victims in Guntur Macan village in Gunungsari district, West Lombok, West Nusa Tenggara, on Monday. During the visit, Lagarde interacted with local residents.(JP/Panca Nugraha)
When it comes to infrastructure development, Finance Minister Sri Mulyani Indrawati seems to be skeptical about the Javanese saying alon-alon asal kelakon (slowly does it), as she wants to break the tradition of relying too much on the cash-strapped state budget to build the country.
By reaching out to the private sector for sources of funds, she believes that infrastructure development in Indonesia will move faster and help spur economic growth.
“If we are looking at the evolution of development financing, we have been so heavily relying on the state budget despite having so many funds available outside of it, whether it comes from state-owned enterprises [SOE], private or foreign firms,” Sri Mulyani told a press conference on the sidelines of the 2018 IMF-World Bank Annual Meetings in Bali on Monday.
The Finance Ministry has decided to enhance the role of public-private partnerships (PPP) to boost the construction of public facilities and export financing as it announced on Monday infrastructure projects set to be financed through the scheme.
Sri Mulyani, a former WB managing director, assigned four of the Finance Ministry-backed financing firms to help mediate funds from the government and the private sector, and plan their utilization for eight infrastructure projects.
The first company is Sarana Multi Infrastruktur (SMI), which is set to organize the PPP scheme for a drinking water company in West Semarang, Central Java, costing Rp 1.19 trillion (US$78.2 million), and a multipurpose satellite costing Rp 6.7 trillion. The satellite will be managed by the Communications and Information Ministry to provide high-speed internet for public spaces in remote areas.
The second firm is Penjaminan Infrastruktur Indonesia (PII), which signed an agreement as a guarantor for three projects currently seeking PPP funding. The projects are South Sumatra provincial road maintenance management, the construction of the Makassar-Parepare railway in South Sulawesi and Komodo Airport expansion in Labuan Bajo, East Nusa Tenggara, which cost Rp 1.35 trillion, Rp 1.1 trillion and Rp 1.1 trillion, respectively.
Monday’s signing also involved government-backed Indonesia Infrastructure Finance (IIF), which will provide support through state funds on a consortium handling the development of the Cikunir-Ulujami toll road on the outskirts of Jakarta, costing Rp 22.5 trillion.
Aside from the three companies, Indonesian Export Financing Agency (LPEI), also known as Eximbank, has committed itself to disburse an undisclosed amount of PPP financing for a fish canning company in East Java as part of the government’s support of small and medium enterprises.
Eximbank also signed a financing deal with state-owned construction company Wijaya Karya, which will expand its business to Africa as it had secured contracts to build a state palace in Nigeria and a housing complex in Senegal.
The government’s joint PPP office, run by the National Development Planning Agency (Bappenas), has targeted to raise $131.1 billion in infrastructure financing from private funds, or 36.5 percent of the total funding needed worth $359.2 billion between 2015 and 2019.
Although the Finance Ministry had been developing non-state budget financing schemes for the past decade, Sri Mulyani said there were still many government agencies and regional leaders who had difficulties grasping the concept of PPP, making them dependent on state funds.
“Many ministries and regional authorities do not know what PPP is, so we have to explain everything to them from the beginning and it poses a challenge to us [in PPP expansion],” said Sri Mulyani. “I have instructed these companies [under the Finance Ministry’s supervision] to reach out to those authorities with good vision on development projects.”
On the same occasion, Public Works and Housing Minister Basuki Hadimuljono lauded the PPP financing expansion as allocating government budget for the ministry alone would never be enough to achieve all the infrastructure goals as mandated by President Joko “Jokowi” Widodo.
“I believe that with more innovative financing for infrastructure, we could accelerate the provision of many [public] facilities that the citizens need so much. If we only rely on the state budget, God knows how many more years it would take [to complete all of the projects],” he said.
