Despite the challenges of COVID-19 pandemic, Indonesia aims to strengthen public-private partnerships to accelerate infrastructure development and economic recovery.
As a vast archipelagic nation with the world’s fourth most populous population, Indonesia’s widespread geography presents a unique challenge for an equitable development. To accelerate its progress, the government has been known to make provisions for infrastructure to support economic activities as a cornerstone.
Defined as a cooperation between the government and business entities in the provision of infrastructure aimed toward the public interest, the public-private partnership (KPBU) is a strategic move to finance development plans and project implementation, considering the limited resources of the country’s State Budget (APBN).
Through the Presidential Regulation No. 38/2015, the public-private partnership framework is expected to help achieve the nation’s infrastructure investment target of USD 429 billion between 2020 and 2024. More than that, the private sector is also expected to contribute more than 50% of the total investment target.
Sri Mulyani, Indonesia’s Minister of Finance, recognizes the importance of a sustainable infrastructure development.
“Within the Ministry of Finance, we have designed several special mission vehicles such as PT Sarana Multi Infrastruktur (SMI) and PT Penjaminan Infrastruktur Indonesia (PII) with tasks of providing loans guarantee and technical assistances to the KPBU’s regions and projects,” stated Sri Mulyani.
She also recognized the importance of efficient institutional and bureaucratic reforms, regulated under the recently passed Indonesian Law No. 11/2020 on Job Creation.
“Under President Joko Widodo’s administration, convoluted regulations have been eliminated and simplified to improve bureaucratic performances. We are continuously improving the ease of doing business in every aspect of government services, including public services,” added the Minister.
There are four immediate sectors which the partnership scheme currently supports: water resources; roads and bridges; housing; and settlement.
The water resources sector includes the building of dams, hydroelectric power, multipurpose dams, and sea dikes. The construction of highways, roads and bridges are included in the roads and bridges sector, while low-cost apartments are part of the housing sector. The settlement sector, on the other hand, incorporates drinking water treatment systems, waste management and wastewater treatments.
Each project that falls into the public-private partnership framework must complete a rigorous cycle, which is comprised of four phases: project identification, preparation, procurement and implementation.
According to the Public Works and Housing Ministry (PUPR), there are 25 ready-to-offer projects valued at IDR 286.8 trillion available in 2021 — most of which come from the roads and bridges sector. Meanwhile, in the water resources sector, the ministry notes a couple of ready-to-offer projects valued at IDR 9.6 trillion.
Ministry of Investment/BKPM is ready to help implement the nation’s growth strategy by supporting every aspect of the investment process, such as providing a one-stop service platform for business registrations and legal administrations: the OSS-RBA. It is a risk-based online single submission system created to ensure transparency and simplicity.
This public-private partnership is a long-term contractual arrangement between public and private entities aimed toward developing infrastructure assets. Its role in accelerating sustainable economic growth is pivotal to the national plan of improving public service delivery.