Indonesia: Infrastructure Part II – General Arrangements

THIS POST WAS ORIGINALLY PUBLISHED OCTOBER 28, 2009

Indonesia: Infrastructure Part II – General Arrangements

The Government of Indonesia formed out general strategy of national development that has three tiers: pro-growth, pro-poor, and pro-job. Infrastructure development is one of the key elements of this strategy; Public-Private-Partnership (PPP) being the cornerstone. It is considered that the PPP option is the most viable to accelerate economic growth in Indonesia.  This arrangement turns out to be perfect to protect private sector and, at the same time to achieve the most effective cooperation with the Government.
(Note: detailed description of PPP is provided by Asian Development Bank in its brochure: Public–Private Partnership (PPP) Handbook ).

As it is mentioned in excellent thesis  Infrastructure Investment in Indonesia: Process and Impact , Indonesia has adopted a regional approach in developing infrastructure by dividing the country into three regions (as depicted in the above graph) : the developed region located in the Western part of Indonesia and the developing and the newly developing regions located in the east.
The legal framework for the Indonesian PPP scheme was established by  Presidential Regulation No. 67 of 2005 on the Partnership of the Government with Business Entities in the Provision of Infrastructure (“Perpres 67/2005”).  The essence of it is presented in the document Infrastructure Development:

The National Committee for the Acceleration of Infrastructure Provision (KKPPI) was established by the Government of Indonesia to coordinate the acceleration of infrastructure provision with the objective of national economic recovery. (Details are here)

National Development Planning Agency (Bappenas) is the major planning adviser on infrastructure, while the Coordinating Ministry of Economic Affairs oversees the short-term issues.
General allocation on Infrastructure expenditures in the country’s budget are reflected in this graph:

Source: © Office of Chief Economist, Bank Mandiri
In March 2009 the National Development Planning Agency (Bappenas) released the Public Private Partnerships (PPP) Book (first edition). It contains 87 projects (among them – 25 transportation, 32 toll-road, 20 water resources) – with total value of US$ 4.5 billion.
All these are divided into three subcategories:
(i)  projects ready to be offered,
(ii) priority projects, and
(iii) potential projects.