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Ministry to expedite PPP projects worth Rp 76 trillion
The projects are expected to enter the early transaction phase by the first quarter of 2021.
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he Public Works and Housing Ministry has vowed to expedite the preparation of seven infrastructure projects worth Rp 76.37 trillion (US$5.4 billion), funded through public-private partnership (PPP) schemes, to progress by early next year, as it seeks to lure more private investment.
They consist of six toll road and bridge projects with a total investment of Rp 70.4 trillion, as well as the Djuanda drinking water system (SPAM) in Purwakarta, West Java, worth around Rp 5.9 trillion, according to PUPR infrastructure financing director general Eko “Heri” Djoeli Heripoerwanto.
Road construction, meanwhile, includes the 31.1-kilometer Bogor-Serpong via Parung toll road, initiated by PT Pamapersada Nusantara, the subsidiary of publicly listed heavy equipment distributor PT United Tractors, according to a ministry document.
The projects are expected to enter the early transaction phase by the first quarter of 2021.
“In 2021, we will start the procurement process for six roads that span 208.7 km and a drinking water system project. If everything goes smoothly, we could execute the process for all listed projects,” he said in an online press conference on Monday.
The government has increasingly relied on the private sector to take part in developing, financing and managing the country’s ambitious infrastructure projects under the National Medium-Term Development Plan (RPJMN) to ease the strain on the state budget.
The National Development Planning Agency (Bappenas) has estimated that the country will need infrastructure investments worth $429.7 billion, equal to 6.1 percent of GDP, between 2020 and 2024.
The state budget is expected to cover only around 30 percent of the required infrastructure development funding until 2024, the Public Works and Housing Ministry estimates.
The seven projects are among 158 ongoing infrastructure projects under the PPP scheme, worth around Rp 1.308 quadrillion, which are currently in either the transaction, preparation or planning process, as shown in the ministry’s document.
Roads and bridges are a favorite among investors, with 91 projects worth Rp 1,091 trillion being prepared. In comparison, there are only eight projects in the water resources sector worth Rp 13.9 trillion being discussed with private companies.
“We are directing the private sector to help build infrastructure that could support economic growth. Meanwhile, the state and regional budgets will be allocated for basic service infrastructure procurement,” Eko said.
To boost private investment in PPP scheme projects, Eko said the government aimed to cut the bureaucratic red tape through deregulations and providing more payment options for investors, including by introducing the limited concession scheme (LCS).
The LCS was regulated under Presidential Regulation No. 32/2020 in February, which allows concession grants for a certain length of time for a business entity to operate or develop existing infrastructure assets owned by the state.
“There are laws, government regulations and presidential regulations that are already enacted to ease investment requirements especially for national strategic projects [PSN],” he said.
Indonesian Toll Road Association secretary-general Kris Ade Sudiyono told The Jakarta Post on Monday that investors welcomed the government’s initiatives.
However, he said the government should not only focus its deregulation efforts on expediting project preparations and the bidding process but also develop a detailed end-to-end plan for infrastructure projects before proposing it to investors.
“I think the Public Works and Housing initiative to expedite the tender process is a great initiative and we highly appreciate it. However, we also need to take a look at the project’s plans, from the initial stages down to the concession period,” he said in a phone interview.
He added that the government’s leadership was also needed to solve lingering issues such as land acquisition and toll road tariff adjustments.
Singapore-based infrastructure financing advisory group Infrastructure Asia previously highlighted the project preparation process in PPP projects as a part that requires improvement from the government.
“As the Committee for Acceleration of Priority Infrastructure Delivery [KPPIP] previously mentioned, the current number one problem is project preparation. Indonesia could look at the existing assets and see how they can be improved while also bringing liquidity in time,” the group’s executive director, Seth Tan, told the Post in an exclusive interview in August.
Despite the shortcomings and the onslaught of an economic recession due to the COVID-19 pandemic, Kris said Indonesia’s infrastructure projects remained highly attractive and deemed resilient by private investors.
“We believe that the infrastructure industry remains attractive for investment despite the pandemic. While it’s true that we are facing situational turbulence, it remains promising in the long run,” he said.
