The Korea Overseas Infrastructure and Urban Development Corporation (KIND) sees Indonesia as one of the most attractive destinations to invest in PPP-based infrastructure projects and has conducted a number of feasibility studies on several such projects.

South Korean Ambassador to Indonesia Kim Chang-beom said the Indonesian office of KIND would act as a facilitator, coordinator and investor for PPP projects in Indonesia.

“KIND will be working as a pipeline and window to explore and identify the appropriate financial resources that can feed into infrastructure developments in Indonesia. It can also work as an intermediary to link potential Indonesian business partners with infrastructure developments in Korea as well,” he said after the official opening of the agency’s Indonesian office in Jakarta on Tuesday.

KIND, which was established by the South Korean government in 2018, provides comprehensive support for Korean companies to expand their overseas PPP investment and development activities. KIND supports the overall aspects of businesses, from identifying projects and supporting project development and finance to making direct investments.

The head KIND’s program management office for project development, Ryan Lee, said in Jakarta on Tuesday that Indonesia had emerged as one of the major private investment destinations in the world.

Citing a World Bank report, Lee said Indonesia had been listed among the top five private investment destinations in the world and received the second largest foreign investment in the Asia-Pacific region with US$6.9 billion in 2018. China was at the top of the list.

“So, it is obvious that Indonesia has become the center of investor interest and when it comes to PPP procedures and legal frameworks, Indonesia serves as an exemplary model for any other emerging developing country. The PPP policy in Indonesia is quite good,” said Lee, while suggesting the Indonesian government could be more flexible in leveraging an investor-friendly policy.

KIND is currently assessing 16 infrastructure projects in Indonesia that could be offered to Korean investors. The projects cover a number of sectors such as energy, waste-to-energy (WTE) and railways.

Ryan said the railway projects were among those that attracted the most interest from Korea and the sector could become one of the most promising, in which Korea can cooperate.

This year alone, KIND has conducted a feasibility study for two projects in Medan: an LRT and a bus rapid transit (BRT).

Aside from the railway and energy sectors, Ambassador Kim said smart city developments, urban development and water-related projects, such as those involving supply, treatment and transportation, were also investment areas in Indonesia that interested KIND.

The opening of an Indonesian branch was part of the revitalization of the Korea New Southern Policy whereby KIND was seeking to expand PPP investment outreach in southern areas. Aside from Indonesia, KIND established offices in Vietnam, Kenya and Uzbekistan.

The Korean government plans to establish a PPP cooperative fund specializing in the so-called New Southern Area worth $100 million by linking the Global Infrastructure Fund (GIF) that invests in overseas PPP projects with the New Southern Policy and to set up a new $1.5 billion fund for infrastructure construction and smart cities by the end of this year.

Korea and Indonesia have enjoyed a close partnership, including in infrastructure development, in recent years. South Korea invested in the second stage of the Jakarta LRT project. The country is also eyeing other railway projects, such as the Semarang LRT and the Cibubur-Bogor LRT connection.

The railway traffic director of the Transportation Ministry’s Railway Directorate General, Zulmafendi, believes the KIND Indonesia office would allow more collaboration opportunities in railway development.

“This year, we have conducted a market sounding in Korea for the second time to offer several projects in railways such as the LRT Cibubur project and a railway project in Lahat-Tarahan and the response from Korea was very good,” he said, adding that Korea participated in a Surabaya-Jakarta high-speed railway feasibility study.

The Office of the Coordinating Economic Minister’s Bastary Pandji Indra said he believed the cooperation center could help fill the financing gap in Indonesia’s infrastructure development. Despite the country’s robust infrastructure development, the state budget imposes a limit to the government’s capacity to deliver infrastructure projects. Thus, Indonesia is looking for alternative financing schemes through PPP and a center for private investment (PINA).

“With the capacity to provide technical assistance, funding and facilitating Korean investors who are attracted to invest in Indonesia, KIND can contribute to promoting investment and identifying the right [investment and financing] that fits Indonesia’s needs,” said the assistant deputy to the minister for housing, land and infrastructure financing.

From 2015 to 2019, the total amount of money Indonesia required to finance infrastructure was $359.1 billion, of which the state budget could only cover 41.3 percent, $148.2 billion, while state-owned enterprises (SOEs) covered 22.3 percent, $79.8 billion. The private participation was needed to close the financial gap of $131.1 billion, 36.5 percent of the total need.

As of May 2019, the PINA, which are under the National Development Planning Ministry, offer investment opportunities worth a total of $50.5 billion in 29 infrastructure projects to prospective investors. These projects cover 18 infrastructure sectors from railways, power plants and oil and gas facilities to urban housing.

According to the Indonesian Investment Coordinating Board (BKPM), South Korea is the sixth-largest foreign investor in Indonesia, with 2,412 projects and a total investment of $1.6 billion in 2018.

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