Public-private partnerships (PPPs) could help Indonesia address its critical $600 billion infrastructure needs over the next decade. However, PPPs in Indonesia have faced several challenges that have prevented them from fulfilling their potential. These challenges include a lack of transparency in project selection, complex coordination requirements, skills deficiencies within government agencies, conflicting regulations, and difficulties acquiring land. For PPPs to succeed in Indonesia and bridge the country's investment gap, the government will need to address inefficiencies, build agency capacity, and demonstrate renewed commitment by successfully implementing 2-3 priority projects in the next year.
Policy & Strategy for PPP in BangladeshEhsan Tanim
In August 2010, the Government of Bangladesh issued the Policy and Strategy for Public Private Partnership (PPP) to facilitate the development of core sector public infrastructure and services vital for the people of Bangladesh. The PPP program is part of the Government's Vision 2021 goal to ensure a more rapid, inclusive growth trajectory, and to better meet the need for enhanced, high quality public services in a fiscally sustainable manner.
Under this new national policy, the PPP Authority was established as a separate, autonomous office under the Prime Minister's Office to support sector line ministries to facilitate identification, development and tendering of PPP projects to international standards. A PPP Unit under the Ministry of Finance was established to foster an environment of fiscal responsibility and sustainability in PPP projects.
The Infrastructure sector has been the key driver for the Indian economy. The sector is critically important for sustaining the momentum of the economic growth, and the Government has undertaken policy interventions and initiatives to boost the sector.
Foreign Direct Investment (FDI) received in the construction sector (including townships, housing and built-up infrastructure) from April 2000 to March 2017 is estimated at USD 24.3 billion.
CII, over the years, has been working very closely with stakeholders across the infrastructure verticals to stimulate greater private sector investment. This edition of the Policy Watch focuses on the infrastructure sector.
CII has been strongly advocating for an Action Agenda towards creating an enabling and integrated policy & regulatory framework, the impact of which could facilitate considerable investments in the Infrastructure sector thus taking India’s Infrastructure story forward.
This issue of Policy Watch takes an in-depth look at the sectoral issues and has outlined some specific recommendations to reinvigorate the growth momentum in the sector.
Policy & Strategy for PPP in BangladeshEhsan Tanim
In August 2010, the Government of Bangladesh issued the Policy and Strategy for Public Private Partnership (PPP) to facilitate the development of core sector public infrastructure and services vital for the people of Bangladesh. The PPP program is part of the Government's Vision 2021 goal to ensure a more rapid, inclusive growth trajectory, and to better meet the need for enhanced, high quality public services in a fiscally sustainable manner.
Under this new national policy, the PPP Authority was established as a separate, autonomous office under the Prime Minister's Office to support sector line ministries to facilitate identification, development and tendering of PPP projects to international standards. A PPP Unit under the Ministry of Finance was established to foster an environment of fiscal responsibility and sustainability in PPP projects.
The Infrastructure sector has been the key driver for the Indian economy. The sector is critically important for sustaining the momentum of the economic growth, and the Government has undertaken policy interventions and initiatives to boost the sector.
Foreign Direct Investment (FDI) received in the construction sector (including townships, housing and built-up infrastructure) from April 2000 to March 2017 is estimated at USD 24.3 billion.
CII, over the years, has been working very closely with stakeholders across the infrastructure verticals to stimulate greater private sector investment. This edition of the Policy Watch focuses on the infrastructure sector.
CII has been strongly advocating for an Action Agenda towards creating an enabling and integrated policy & regulatory framework, the impact of which could facilitate considerable investments in the Infrastructure sector thus taking India’s Infrastructure story forward.
This issue of Policy Watch takes an in-depth look at the sectoral issues and has outlined some specific recommendations to reinvigorate the growth momentum in the sector.
Public private partnership refers to an association between a Government agency and a private-sector organization that intend to complete a project for public welfare. This relationship is basically used to finance, build and purpose projects like public transportation systems, conference centers and parks. Aiming for a project to be accomplished on priority or may be sooner can be allowed in the association with public private partnerships.
Identify Current Deficiencies in Public Private Partnership Practices and Are...IJERA Editor
Public- Private Partnerships is becoming a popular investment model since late 1980s and 1990s in the world.
PPPs in the delivery of public services have become a phenomenon which is spreading around the globe and
generating great interest among governments, investors and other key project stakeholders. Public- Private
Partnerships avoid the often negative effects of either exclusive public ownership or outright privatization. This
is seen as a win-win situation for both public and private entities where they undertake large scale projects. This
balanced approach is especially welcomed in public services which touch on every human being‟s basic needs
& economic development of a country.
Basically in this research, it is attempted to address three main objectives, which are to identify the current
Public- Private Partnerships coverage on infrastructure projects in Sri Lanka, to identify current deficiencies in
Public- Private Partnerships practices and areas which resist Public- Private Partnerships being an attractive
investment model in infrastructure developments in Sri Lankan context and to propose an improved PublicPrivate
Partnerships framework/model that can be used effectively and address the identified problems in
infrastructure developments in Sri Lanka.
Based on a structured questionnaire, data collection has been done using a selected sample. Then, the data set
has been evaluated using Likert Scale and giving weights for that and the total percentage of score.
Lack of the knowledge and deficiencies of the PPP framework are main issues in PPP practice in Sri Lanka.
Thus, it is not much popular investment model to infrastructure development at the moment. Further the
government should change their role from developer and operator to facilitator to improve the PPP practice in
Sri Lanka
Final project week 4 accelerating digital financial services adoption in bang...Md. Ashraful Alam
This digital artifact has been prepared as part of the WBG group course on Unlocking Investment and Finance in Emerging Markets and Developing Economies (EMDEs) course
The paper on real estate development is based on cost analysis and revenue generation of United World Trade Centre, Tripureshwor under land-lease agreement with T.U., Nepal
Suggested citation: Khaver, A., Ahmed V., and Menon, R. (2021). ‘Using stakeholder dialogues for strengthening evidence use to inform government decision-making during COVID-19’. Learning Brief 4. Strengthening Evidence Use for Development Impact, Oxford.
Public and Private Partnership in Infrastructure Development in Indiainventionjournals
ABSTRACT: It is well recognized that, with its present state of physical infrastructure, India will be hard-pressed to sustain 7 percent plus annual GDP growth and expected to 2 percent hike. Be it in power, roads, ports, airports, water, railways, urban facilities or even telecoms, the country’s infrastructure needs are enormous. Efforts have also been made, over the years, to strengthen the policy and regulatory framework underpinning some of the key infrastructure sectors. Throughout the past decade, private investment in infrastructure has remained at well below the targeted 2 percent of GDP. Significant investment in physical infrastructure will also lead to employment generation, increased production efficiency, reduction in cost of doing business and improved standard of living. Infrastructure investment is expected to surge to 12.1% of GDP by FY20 from 7.0% of GDP in FY11. Rising demand for infrastructure facilities, given the rapid growth in urbanisation, bulging of the middle class and an increasing working-age population, would engender substantial increase in infrastructure investments during the current decade. While physical infrastructure is expected to play a vital role in maintaining the strong growth momentum during the current decade, improvement in social infrastructure (especially health and sanitation and education) will help the country to move toward inclusive growth. Social infrastructure mainly encompasses the health and education system. In recent years, efforts have been made by the Government of India (GoI) to step-up investment in infrastructure, and particularly to catalyze greater private investment. Over the years, financing of infrastructure projects has been considered the responsibility of the government. However, given budgetary constraints and other priorities, although public investment continues to account for a larger share in infrastructure financing, it has decelerated since the past few years. Moreover, GoI is making efforts to encourage private investments in infrastructure projects. As a result, the share of the private sector in infrastructure financing gradually increased from a mere 25.1% in FY05 to 32.7% in FY10 (E) and is expected to increase further to 45.2% in FY20. In this context this paper mainly focuses to provide an analytical abstract of sector-wise infrastructure developments in the country and the status of private participation and the PPP (Public and Private Partnership) in public infrastructure and contribution to economic growth.
UCLG Congress 2012 - Linking Cities to FinancingYIPD_Indonesia
This document was prepared by the Yayasan Inovasi Pemerintahan Daerah (YIPD) in cooperation with GFA as part of the Sub-National Implementation of Decentralization as Contribution to Good Governance program (DeCGG-SNI).
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
Public private partnership refers to an association between a Government agency and a private-sector organization that intend to complete a project for public welfare. This relationship is basically used to finance, build and purpose projects like public transportation systems, conference centers and parks. Aiming for a project to be accomplished on priority or may be sooner can be allowed in the association with public private partnerships.
Identify Current Deficiencies in Public Private Partnership Practices and Are...IJERA Editor
Public- Private Partnerships is becoming a popular investment model since late 1980s and 1990s in the world.
PPPs in the delivery of public services have become a phenomenon which is spreading around the globe and
generating great interest among governments, investors and other key project stakeholders. Public- Private
Partnerships avoid the often negative effects of either exclusive public ownership or outright privatization. This
is seen as a win-win situation for both public and private entities where they undertake large scale projects. This
balanced approach is especially welcomed in public services which touch on every human being‟s basic needs
& economic development of a country.
Basically in this research, it is attempted to address three main objectives, which are to identify the current
Public- Private Partnerships coverage on infrastructure projects in Sri Lanka, to identify current deficiencies in
Public- Private Partnerships practices and areas which resist Public- Private Partnerships being an attractive
investment model in infrastructure developments in Sri Lankan context and to propose an improved PublicPrivate
Partnerships framework/model that can be used effectively and address the identified problems in
infrastructure developments in Sri Lanka.
Based on a structured questionnaire, data collection has been done using a selected sample. Then, the data set
has been evaluated using Likert Scale and giving weights for that and the total percentage of score.
Lack of the knowledge and deficiencies of the PPP framework are main issues in PPP practice in Sri Lanka.
Thus, it is not much popular investment model to infrastructure development at the moment. Further the
government should change their role from developer and operator to facilitator to improve the PPP practice in
Sri Lanka
Final project week 4 accelerating digital financial services adoption in bang...Md. Ashraful Alam
This digital artifact has been prepared as part of the WBG group course on Unlocking Investment and Finance in Emerging Markets and Developing Economies (EMDEs) course
The paper on real estate development is based on cost analysis and revenue generation of United World Trade Centre, Tripureshwor under land-lease agreement with T.U., Nepal
Suggested citation: Khaver, A., Ahmed V., and Menon, R. (2021). ‘Using stakeholder dialogues for strengthening evidence use to inform government decision-making during COVID-19’. Learning Brief 4. Strengthening Evidence Use for Development Impact, Oxford.
Public and Private Partnership in Infrastructure Development in Indiainventionjournals
ABSTRACT: It is well recognized that, with its present state of physical infrastructure, India will be hard-pressed to sustain 7 percent plus annual GDP growth and expected to 2 percent hike. Be it in power, roads, ports, airports, water, railways, urban facilities or even telecoms, the country’s infrastructure needs are enormous. Efforts have also been made, over the years, to strengthen the policy and regulatory framework underpinning some of the key infrastructure sectors. Throughout the past decade, private investment in infrastructure has remained at well below the targeted 2 percent of GDP. Significant investment in physical infrastructure will also lead to employment generation, increased production efficiency, reduction in cost of doing business and improved standard of living. Infrastructure investment is expected to surge to 12.1% of GDP by FY20 from 7.0% of GDP in FY11. Rising demand for infrastructure facilities, given the rapid growth in urbanisation, bulging of the middle class and an increasing working-age population, would engender substantial increase in infrastructure investments during the current decade. While physical infrastructure is expected to play a vital role in maintaining the strong growth momentum during the current decade, improvement in social infrastructure (especially health and sanitation and education) will help the country to move toward inclusive growth. Social infrastructure mainly encompasses the health and education system. In recent years, efforts have been made by the Government of India (GoI) to step-up investment in infrastructure, and particularly to catalyze greater private investment. Over the years, financing of infrastructure projects has been considered the responsibility of the government. However, given budgetary constraints and other priorities, although public investment continues to account for a larger share in infrastructure financing, it has decelerated since the past few years. Moreover, GoI is making efforts to encourage private investments in infrastructure projects. As a result, the share of the private sector in infrastructure financing gradually increased from a mere 25.1% in FY05 to 32.7% in FY10 (E) and is expected to increase further to 45.2% in FY20. In this context this paper mainly focuses to provide an analytical abstract of sector-wise infrastructure developments in the country and the status of private participation and the PPP (Public and Private Partnership) in public infrastructure and contribution to economic growth.
UCLG Congress 2012 - Linking Cities to FinancingYIPD_Indonesia
This document was prepared by the Yayasan Inovasi Pemerintahan Daerah (YIPD) in cooperation with GFA as part of the Sub-National Implementation of Decentralization as Contribution to Good Governance program (DeCGG-SNI).
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
A
Two-Way
Street
Public-private
partnership projects
can help emerging
economies fill
infrastructure gaps—
if governments
define a clear ROI.
BY SARAH FISTER GALE
ILLUSTRATION BY PETER AND MARIA HOEY
A
W M
f i m / /k
\ v $
11 M■■
■ jii Jia
nfrastructure projects help nations
build a better future. Emerging
economies need upgrades to roads,
railways, energy grids and broadband
networks in order to sustain
domestic growth. But these countries
face a particular conundrum: how
to build highways, power plants and
ports that will stimulate economic
development when public funds are
in short supply.
To make ends meet, many governments are
turning to public-private partnerships (PPPs). PPPs
allow the public sector to leverage private funding
and expertise to more rapidly plan, launch and
deliver infrastructure projects. In exchange, private-
sector partners are given long-term maintenance
and operation contracts that tu rn a profit.
“O n the face of it, PPPs are a great project model
to fill in the funding gaps these countries face,"
says Andy North, a former senior vice president of
strategic development and management in Kuala
Lumpur, Malaysia, for AECOM, a global design,
engineering and construction firm.
The global gaps are staggering. According to
McKinsey & Co., an estimated US$57 trillion will be
needed to finance infrastructure development around
the world through 2030, with much of that invest
ment needed in developing countries. Latin America
and the Caribbean, for example, will need more than
US$700 billion to double power-generation capac
ity by 2030, according to the U.S. Energy Informa
tion Administration. And sub-Saharan Africa needs
US$93 billion per year to address its infrastructure
shortfall, according to The World Bank.
Given these urgent needs, PPP projects hold
huge potential. But governments m ust clarify proj
ect roles, risks and ROI before private organizations
will be prepared to foot the bill.
A m o u n t t h a t w ill be nee d ed t o fin an c e
in fra s tru c tu re d e v e lo p m e n t aro u n d th e
w o r ld th r o u g h 2 0 3 0 , w it h m uch o f t h a t
in v e s tm e n t nee d ed in d e v e lo p in g c ou n trie s
Source: M c K fjS e y ifib o .
! trillionyear
A in o u n t s u b -S a h a ra n A fric a needs to
address its in fra s tru c tu re s h o rtfa ll
1 _ .Scarce TheWoild Bank : ,,V
"In a lot of cases, the private investors cannot
see how they will get the full cost recovery,” Mr.
North says.
PAVING THE WAY
To attract private-sector investments, governments
must paint a clear picture of what they bring to
the table. But this will be easier for some projects
than others. While energy and toll road initiatives
may offer a distinct ROI, projects to generate clean
drinking water or treat wastewater have less obvi
ous revenue streams once construction is complete.
Indeed, power projects are among the most
common types o ...
Quantity Surveyor’s Impact: A Panacea to achieving Critical Success Factors i...inventionjournals
Public-Private-Partnership (PPP) is an innovative infrastructure procurement system aimed at providing unique opportunities in the development and funding of public infrastructure facilities.The procurement system ranges from simple contracting of services to the involvement of private sector in financing, design, construction, operation and maintenance of infrastructure. However, organising PPP is not an easy task due to its complexity and long term contractual obligagtions that requires the involvement of stakeholders and professionals for its successful implementation. Procurement procedure under PPP is very complicated and more costly and time consuming than the traditional procurement approach. Therefore the need to address the roles of the Quantity Surveyor in providing the total cost and procurement management has been recognized and become necessary in developing effiecient and effective sustainable PPP projects. Although many studies show that there has been no comprehensive study on the roles of the Quantity Surveyor in PPP concession projects which therefore indicate a knowledge gap in this particular area of the study. Hence, the aim of this paper is to explore the roles of professional Quantity Surveyor in achieving the critical success factors (CSF)for PPPconcession projects. Findings in the study have shown that Quantity Surveyor has a great role to play in achieving the Critical Success Factors (CSF) for PPP concession projects in the areas of:detailed feasibility study; compititive financial proposal; effective procurement management; preliminary qualification evaluation & tendering phase; solid revenue & cost estimate; proper partner’s selection criteria; and solid financial packaging. Findings from the study further revealed that the PPP contractual arrangement offers the primary role of a professional Quantity Surveyor within the PPP concept leading to the selection of the right concessionaire through: request for expression of interest, qualifications, proposals; negotiation with preferred bidders; and evaluation methods & criteria and also in the performance evaluation of the entire development and delivery process within the project objectives.
Mini Workshop Infrastruktur Daerah - Skema KPBU - 2018H2O Management
Mengapa perlu Investasi Skema KPBU atau Public Private Partnership (PPP)?
Berbagai negara melakukan PPP untuk alasan yang berbeda-beda.
•Untuk memperoleh dana investasi tambahan. (Afrika Selatan)
•Untuk mengadakan jasa pelayanan umum yang belum tersedia. (Thailand)
•Untuk memperoleh teknologi baru dan yang sudah terbukti keunggulannya. (Korea Selatan)
•Untuk memperbaiki tingkat efisiensi. (Amerika Serikat)
•Untuk meningkatkan kompetisi. (Inggris)
•Untuk meningkatkan transparansi proses pengadaan. (Filipina)
•Untuk menciptakan kesempatan kerja. (India)
Indonesia??? Hampir mencakup keseluruhan aspek di atas.
Tata Cara Kerjasama SPAM oleh Effendi MansurH2O Management
“Si Vis Pacem Para Bellum” (Jika kau ingin damai, bersiaplah untuk perang)
Kelangkaan air akan menjadi sumber malapetaka ke depan jika kita tak mampu mengatasinya. Harga suatu barang dan jasa selalu mengikuti nilai ‘langka ini. Air sebagai sumber kehidupan merupakan asset yang vital bagi bertahan hidup manusia. Ataukah nanti akan terjadi perang dunia tiga berupa perang sumber daya air? Bagaimana kita dapat menyediakan hal yang paling esensial bagi publik ini?
Apakah ada skema pembiayaan non bank yang relevan dan fleksibel dalam implementasinya?
Makalah ini disusun atas kepedulian kami pada penyediaan infrastruktur dasar seperti air, listrik, sarana transportasi dengan skema investasi non bank yang bersifat longterm investment di atas 10 tahun. Kami ingin berbagi pengalaman dalam menyusun program-program yang bermanfaat untuk masyarakat luas dengan pola pembiayaan dari non bank, baik itu melalui Investor-Sponsor maupun Investor-Lender.
Kami telah menyusun perencanaan secara holistik dalam jangka panjang yang perlu didukung beberapa pihak terkait (stakeholder) agar terealisasi secara bertahap sesuai dengan rencana bisnis. Investasi Infrastruktur Skema KPBU di Tengah Defisit Anggaran Sebagai Kunci Pengembangan Daerah Indonesia.
Dealing PPP Investment - Developing Power Plant H2O Management
Tantangan mengelola asset seperti halnya Keberanian menanamkan budaya unggul dalam mengendalikan perilaku agar asset aman dan terjaga. Asset yang berlimpah tanpa penilaian yang akurat akan menjadi sampah yang tumpah tak dapat dimanfaatkan secara tepat. Membangun industri adalah membangkitkan semangat etos kerja di tiap-tiap bagian rantai produksi agar bersinergi membuahkan produksi optimal.
Pengembangan pembiayaan sektor infrastruktur menjadi kunci dalam meningkatkan sarana dan prasarana yang dibutuhkan di tiap-tiap daerah. Pembangunan sebuah sarana publik akan menjadi mesin pertumbuhan ekonomi (growth engine) sebagai penopang kegiatan di sebuah wilayah. Misalnya adanya pembangunan pelabuhan, pasar, jalan dan pembangkit listrik, maka akan mengundang publik untuk berduyun-duyun melakukan kegiatan sosial dan ekonomi.
Sumber keuangan bank hingga saat ini ketersediaannya sangat terbatas karena menyangkut dana nasabah jika harus membiayai proyek infrastruktur yang beresiko tinggi. Sementara sumber keuangan non bank, baik dari dana asuransi dan pensiun dalam negeri pun punya keterbatasan. Oleh karena itu, pemerintah telah mengeluarkan inovasi kebijakan yang tidak membebani hutang pemerintah baik pusat maupun daerah, dengan cara sinergi kooperatif dengan badan usaha untuk mewujudkan program yang kolaboratif, seperti tertuang dalam Perpres No.38 Tahun 2015.
Partisipasi dalam mempercepat pembangunan infrastruktur dengan menyediakan sumber keuangan non bank, tepatnya investor sponsor maupun investor lender yang berasal dari luar negeri. Karena pola penyiapan proyek ini memiliki struktur yang jangka panjang maka kami melihat beberapa perencanaan yang sudah dicanangkan pemerintah tidak kunjung siap untuk dibiayai (financial close), apalagi beban equity 20% sampai 30% juga tidak mudah dipenuhi oleh para sponsor project finance.
Adakah penyedia investasi 100% (Equity & Debt)? Kapan kita dapat memeratakan kebutuhan listrik di seluruh Nusantara?
1. The urgent need to address Indonesia’s critical
infrastructure gaps was a key issue during the
Presidential campaign, when both candidates pledged to
improve the country’s infrastructure as a means to drive
economic growth. Sustained over time, infrastructure
investments will have a huge impact on Indonesia’s GDP
and longer-term growth prospects.
To achieve its ambitious growth targets, Indonesia needs to
address critical infrastructure gaps and invest at least $600
billion in the next 10 years in building and upgrading
infrastructure according to estimates by McKinsey &
Company. Infrastructure investments have decreased
dramatically in the last decade, hovering at 3 – 4 percent of
GDP—about half of what is required. A recent World Bank
report estimates that Indonesia has lost at least 1 percent of
economic growth each year over the past decade as a
result. The government’s ability to tackle infrastructure
investment has been limited by a host of issues including
fiscal constraints with significant budget commitments to
fuel subsidies. A difficult land acquisition process has been
another serious stumbling block. As a result, less than half of
the infrastructure projects planned for this year—13 out of
34—will be launched.
A $180 billion opportunity for PPPs
Public-private partnerships (PPPs) can help bridge some of
the investment gap by bringing in private finance. The PPP
model transfers to the private sector responsibility for
financing, designing and constructing an asset, as well as
Public private partnerships,
when delivered successfully,
could help Indonesia address
critical infrastructure gaps that
require investments of $600
billion in the next 10 years.
Can public private partnerships
solve Indonesia’s infrastructure needs?
By Diaan-Yi Lin
2. $46.8 billion in 2010 to 27 projects worth USD 45.7
billion in 2013. The status of several projects has
also been downgraded, with no clear rationale for
change. The Pondok Gede Water Supply project,
for example, was classified as “ready for offer” in
2011, and downgraded to “priority” in 2012 without
any explanation. The lack of transparency and
consistency makes it hard for the private sector to
make commitments and undermines the credibility
of Indonesia’s PPP process.
Second, PPPs are still viewed primarily as a means
of financing, and often perceived as too complex
because of the extensive coordination required for
implementation. PPPs involve more stakeholders
(e.g., financiers, construction firms, government
ministries) and more steps to complete than
traditional public procurement. Contracting
agencies, for example, have the additional
responsibility of allocating risk between public and
private stakeholders and drafting more complicated
bid proposals for the multiple stakeholders. As a
result, they often prefer to use public budget funds
or international grants, which are much easier to
administer. PPPs become the last resort, typically
used for lower priority projects.
Third, many government contracting agencies lack
the right set of skills. PPPs are a complex
undertaking, requiring specialized skills in
structuring transactions, financial analysis and
modeling, commercial legal expertise and more.
Contracting agencies often lack the project finance
skills to develop pre-feasibility studies, to allocate
risks, to structure the PPP, and to interact and
negotiate with private investors. Projects that have
not been formulated well have resulted in PPP
concessions being cancelled and projects being
returned to the government. The Medan-Kuala
Namu and Cileunyi-Sumedang-Dawuan PPPs, for
example, were converted into government funded
projects in 2009 due to lack of investor interest.
With more than 45 laws and regulations governing
PPPs in Indonesia, many provisions in the PPP
regulatory framework conflict or overlap across
different levels of government, and across different
agencies. This creates confusion among the
investor community and contracting agencies,
further deterring them from participating in PPPs.
Furthermore, Indonesia’s cumbersome PPP permit
process entails obtaining more than 40 permits and
licenses from an array of government agencies, with
a PPP entity required to apply for a business
license, secure approvals for the project’s technical
specifications, obtain operating permits, and secure
some of the responsibilities for operating and
maintaining it after completion. In several emerging
countries such as India, Mexico and Brazil, PPPs are
contributing 25 – 30 percent to infrastructure
development, on average, at a lower cost and faster
delivery time than traditional procurement. PPPs in
Indonesia offer an estimated $180 billion opportunity
if they could meet 30 percent of Indonesia’s
infrastructure needs, based on these international
benchmarks.
The Indonesian government has shown strong
commitment to involving the private sector in
infrastructure development. In 2005, Indonesia
introduced the legal concept of PPPs to boost
procurement through a competitive tender process.
Other regulations were also introduced to encourage
private investments in sectors including
telecommunications, oil and gas, railways, ports,
electricity, and water and sanitation. More recently,
the Land Acquisition Law was amended to ease the
land clearing process. In addition, fiscal support has
been made available throughout the PPP process.
The government’s Project Development Facility, for
example, is a revolving fund for feasibility studies
during project preparation.
Despite the efforts, however, few PPPs in Indonesia
have been able to finalize contract terms. According
to BAPPENAS, Indonesia’s Ministry of National
Development Planning, only 24 PPPs have made it to
construction or operation, with no new PPPs reaching
financial close—signed contracts between the
government, winning bidder and financing parties—
since 2009. Most are stuck in the preparation and
transaction stages. Out of the 48 PPP projects worth
more than $57 billion (approximately 570 trillion
rupiah) announced in 2013 by BAPPENAS, 26 are in
preparation stage and 21 are in transaction stage.
Even the five PPPs identified as showcase projects
are struggling, and only one—the Central Java Power
Plant—is signed and currently embarking on financial
close.
Indonesia’s PPP gridlock
To understand why PPPs remain in gridlock in
Indonesia, McKinsey made an assessment of the
process of PPP management in Indonesia, and found
several critical challenges that explain why few PPPs
succeed.
First is the lack of transparency on how projects are
selected and prioritized as PPPs. The number of PPP
projects initially listed by BAPPENAS has changed
drastically; going down from 100 listed projects worth
3. approval for construction. The Central Java Power
Plant required more than 50 permits and licenses
prior to construction. While this is not uncommon in
developing countries, Indonesia’s decentralized
government adds further complexity, with regional
permitting agencies issuing conflicting approvals. For
example, regents at the sub-provincial level can stall
the approval of environmental impact permits even
when requirements have been fulfilled, while line
agencies at the national level do not have the
authority to challenge such decisions.
Finally, land acquisition, a major challenge in any
infrastructure project, has crippled several
infrastructure projects with the private sector required
to cover up to 30 – 40 percent of the total investment
costs. New enabling laws have been put into place,
for example, the new Land Acquisition bill in 2012
which speeds up the process with time limits
established to contest and sell land, independent
appraisals for property valuation and responsibilities
designation for every stage of the process. However,
the law does not apply retroactively, meaning only
new projects that have not yet started their land
acquisition processes, will benefit.
Capturing the $180 billion PPP opportunity in
Indonesia requires new approaches. For the
partnerships to have impact, the new Indonesian
government needs to focus on driving change across
contracting agencies at the national and regional
level, bringing PPPs into the mainstream and
unequivocally supporting private sector involvement
in infrastructure development. A strong and
centralized body should be established to support
PPPs. Addressing process inefficiencies is necessary,
and, at the same time building the skills and
competencies of contracting agencies at scale. The
new government should also proactively support and
deliver on 2 – 3 priority projects within the next 6 – 12
months, to demonstrate its renewed commitment to
PPPs. These projects can be selected from the
current five showcase projects that are currently
stalled. The success of these projects would go a
long way to enable significant change, creating
confidence in Indonesia’s infrastructure opportunity
for the future.
Diaan-Yi Lin is a Partner in McKinsey's
Southeast Asia office