Mapping Indonesia’s Infrastructure-Building Landscape

In recent years, the government of Indonesia has allocated a big portion of APBN for medical and welfare needs in response to the COVID-19 spread. As the transmission is slowing down, Indonesia intends to begin refocusing on infrastructure development. B20 Finance & Infrastructure (F&I) Task Force (TF), an official G20 global business community dialogue forum, enthusiastically supports this movement. They proposed a recommendation regarding the need for development of investment-ready infrastructure projects to fill in the already-existing infrastructure gap, as they have also formed the development project pipeline for private sectors. On the other hand, the forum also mentioned the importance of effective governance to help narrow the gap. B20 Finance & Infrastructure Task Force aims to raise awareness for collaboration, partnership, and collective investment in infrastructure development, with emphasis on project preparation to ensure commercial viability and investment readiness. In essence, they identified the need to make infrastructure projects’ risk-to-return ratio attractive to the private sector, thus making it a priority issue among the other recommendations in respect to G20. In addition, Joko Widodo’s presidency has just unveiled 13 new national strategic projects through the Ministry of Economic Coordinator Regulation Number 9 Year 2022 regarding the Changes of National Strategic Projects List. These projects include a variety of vital infrastructures to be built nationwide. Deputy for Coordination of Regional Development and Spatial Planning at the Coordinating Ministry for the Economy, Wahyu Utomo, stated that the projects are anticipated to be finished on time and on target in aim of impactful influence for the national economy all across Indonesia.

The 13 new national strategic projects span a broad range of industries and thus are widely distributed throughout the country. These initiatives include the Integrated Palapa Ring project in the technology sector, Deep Coconut Development and Its Derivatives Industry in the farming sector, Drinking Water Supply System Development in the Clean Water and Sanitation sector, The Thousand Island Tourism Project in the tourism sector, Railway Logistics Infrastructure in the train sector, Konawe Industrial Park Industrial Estate development in the estate sector, Construction of Rukoh Dam and Rukoh Dam Steering Building in the dam sector, Large-Scaled PLTS construction in the energy sector, Integrated PT Perkebunan Nusantara in the food sector, and three projects in the smelter sector which includes PT Vale Indonesia Integrated Smelter Development Project in Bahodopi-Pomala and Electric Battery Nickel Smelter in East Halmahera. The government aims to ensure that all projects are finished accordingly to target as it will benefit Indonesia’s economy, both regionally and nationally. Four BUMN Karya, PT Waskita Karya (Persero) Tbk, PT Wijaya Karya (Persero) Tbk, PT Hutama Karya (Persero), and PT PP (Persero) Tbk, have declared that they are willing to work on the Nusantara IKN megaproject if they are given the go-ahead by the government. The IKN project has PT Waskita Beton Precast Tbk (WSBP) quite optimistic as it has the potential to provide needed materials through its core business. In addition to the government and State-Owned Enterprises, the Private sector is also eager to get involved in initiatives for the IKN project, as indicated by PT Acset Indonesia's cordial response to the government's opportunity to incorporate the private sector in the IKN and promote Indonesia's infrastructure development.

The private sector's plan to partake in building Indonesia's infrastructure proves that these projects are multi-layered and must be supported by various levels of society. A large sum of Rp6,500 trillion in investments is required to fund Indonesia's infrastructure projects leading up to 2024. The government plans to utilize 42% of the State Budget (APBN) to further support the numerous projects while the rest should come from private investments and funding. Director General of Financing and Risk Management at the Ministry of Finance, Lucky Alfirman, stated that external funding is required to reduce government’s expenditure. As stated on the B20 Finance & Infrastructure Task Force webinar for the G20 on 9th August, several infrastructure projects initiated by the government have not yet found investors. Nevertheless, CEO of the Indonesia Investment Authority and Chair of the B20 Finance & Infrastructure Task Force, Ridha Wirakusumah and his team have developed solutions including increasing access to affordable and suitable financing sources for infrastructure, encouraging collaboration between countries to accelerate a fair transition to net-zero, accelerating development and adoption of digital and intelligent infrastructure, and lastly improving regulation of global financial services to achieve a better balance between economic growth, productivity, and stability. Furthermore, risk management becomes their top priority to attract investors on this infrastructure project. Summing up, the development of quality infrastructure is a long-term project with a large impact. Therefore, both the government and society must work hand in hand.

Sources:

Bisnis

CNBC Indonesia

DetikFinance

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