Mutual Cooperation
    Category: SOEs in Transition By : Sonya Angraini Read : 2120 Date : Sunday, May 04, 2014 - 18:42:47

    Source: Bappenass

    Indonesia would like to become a middle-income country by 2025, with income per capita of around $14,500. For that to happen, Indonesia needs to boost economic growth in every aspect, and for that it needs better infrastructure. BastaryPandjiIndra, director for public private partnership (PPP) development at the National Development Planning Board (Bappenas), says that PPP schemes, in which state firms often play a crucial role, is one of the best ways to get that infrastructure built. “The government’s success can’t be measured mainly on whether it can build infrastructure or not, but it should be judged on how it can deliver and maintain services in the long run,” says Bastary, 53, who has a doctoral degree in planning and development studies from the University of Southern California.

    Indonesia needs huge investment, an estimated Rp 6 quadrillion, to build infrastructure over the next five years. Over the last five years, the government has allocated only Rp 1.2 quadrillion for infrastructure development and Bastary hints that the amount will likely stay the same for the next five years. This amount, which comes from the central and regional governments as well as state enterprises, is only 20% of total investment needed.

    Private investors are expected to contribute by as much as 20%. This means there is a 60% gap in financing and the government is looking for alternative funding to close this gap.

    “We need to be creative,” says Bastary. The government is currently obtaining funds from global financial institutions such as the World Bank, the Asian Development Bank and the Japan International Cooperation Agency. There are also government and infrastructure bonds. With limited funds, Bastary explains that the government will optimize its financing ability through several schemes. One of them is availability payment, in which the government (both central and regional) uses funds from private investors to develop a project. In return, the government is committed to payments to investors for a defined period of time on a regular basis or for hitting certain milestones.

    Bastary adds that PPP is not only about the money. It also can be a source of knowledge and technology transfer. Therefore, the government is providing solutions and incentives to attract investors to invest through PPP. “It’s time for us to grab the available opportunities,” he says. The government provides guarantees in case of setbacks, such as unrest, although Bastary notes these guarantees will be reviewed case by case. Tax holidays are also available, depending on the project. The government also has viability gap funding (VGF) where it puts in the initial investment to make a project more feasible. The amount of VGF, however, should be no more than 49% of total investment. “We can no longer ignore the importance of PPP. It must be done now, there’s no other way,” he notes.