President Joko “Jokowi” Widodo has called on state-owned enterprises (SOEs) to involve private companies in the country’s massive infrastructure development initiative.

“I remind state-owned enterprises not to take them all; please leave space for private companies, including small businesses, to be involved in infrastructure projects,” Jokowi said in his opening speech for Indonesia Infrastructure Week in Jakarta International Expo, North Jakarta, on Wednesday.

The President’s remark received a rousing round of applause from the audience, which comprised company executives from the construction sector.

“Please give the private sector priority. If the private sector does not want to take a project, then let the SOEs do it, especially for projects with a lower internal rate of return [IRR]. However, if SOEs don’t want to do the project, the government would do it,” he said.

Jokowi said he had received many complaints from small contractors who felt they were being left out of the country's massive infrastructure development push, which is still dominated by SOEs.

“Many complaints came from local contractors in the provinces, regencies, and cities. They questioned why most of the infrastructure projects are being taken by SOEs,” the President said.

He warned that in the next five years, the private sector should play a bigger role in infrastructure development.

Earlier last month, the Indonesian Chamber of Commerce and Industry (Kadin) also reminded the government to involve small and medium-scale contractors, especially local construction workers, in future infrastructure projects, such as the construction of the new capital city in North Penajam Paser and Kutai Kartanegara regencies, East Kalimantan.

According to Kadin, many small construction companies have had to close their business because they were not given more opportunities.

“Data from the Indonesia Builder Association [Gapensi] shows that many small-and medium-scale construction companies had to close down because they could not compete with state-owned construction companies in the development of infrastructure projects,” said Diding S. Anwar, the head of Kadin's permanent committee on infrastructure financing, who is worried about the fate of local contractors.

Diding said the number of local construction companies, which reached about 80,000 at the end of 2014, had declined to about 43,000 enterprises at the end of 2018. This means that some 37,000 companies permanently closed their doors in only four years.

“The decline was quite significant. They were forced to close their business because they did have any work to do. So, we need to support the government’s intention to increase the participation of small and local contractors in infrastructure projects. The only way for small contractors to survive is to get infrastructure projects,” Gapensi deputy chairman Errika Ferdinata told The Jakarta Post on Thursday.

Errika said Gapensi was preparing a strategy that would ensure small contractors played an important part in the country’s construction supply chain.

Infrastructure development is still a government priority for the next five years, including the development of 1,500 kilometers of new toll roads, 2,509 km of new roads and bridges that span 60,000 meters in total.

Data from National Development Planning Ministry shows that Indonesia needs at least Rp 6.445 quadrillion (US$459.71 billion) in the next five years for infrastructure projects. The state budget will only cover 37 percent, while 21 percent will come from SOEs and 42 percent is expected to come from the private sector.

Meanwhile, Public Works and Housing Minister Basuki Hadimuljono said on Wednesday that his team would make sure that the private sector played a bigger role in infrastructure development, especially those with good IRR. Basuki conceded that participation from the private sector was not yet optimal.

Erwin Aksa, Kadin’s deputy chairman of construction and infrastructure, hailed the government’s plan to give more infrastructure projects to the private sector.

However, he pointed out that financing requirements should also be eased to give more private companies the opportunity to take on the task.

“The government must support the private sector. The most important thing is building transparency in establishing partnerships with private companies,” Erwin said.

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