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Jakarta, 13 January 2011
MINISTRY OF NATIONAL DEVELOPMENT PLANNING /
NATIONAL DEVELOPMENT PLANNING AGENCY (BAPPENAS)
INFRASTRUCTURE DEVELOPMENT STRATEGY IN INDONESIA
Expenditure on Infrastructure Development
AGENDA
Infrastructure Development Achievement
Policy and Strategy on Infrastructure Development
PPP Development
National Connectivity
2
Expenditure on Infrastructure Development
3
Foreign Direct Investment Status
The Indonesian government has been eager to attract private investment in infrastructure, and has employed a number of tools and enacted a variety of measures to facilitate investments and increase the number of public private partnerships (PPPs).
The efforts of the government are proving fruitful as FDI in Indonesia has grown substantially over recent years, from US$ 6 billion in 2006 to US$ 10.8 billion in 2009 (Source: the Indonesia Investment Coordinating Board).
This trend looks set to continue in 2010, with first quarter figures rising by 41% year-on-year (y-o-y) to US$ 3.92 billion. Strong sectors for investment continued to be the transport, storage and communications industry, which recorded US$ 941.5 million investment for 23 projects and the mining sector, which attracted US$ 711 million for 12 projects. Both of these sectors demand supporting infrastructure, and investment into the sectors has buoyed the construction sector.
4
Indonesia Infrastructure Investment Impact on Macro Economic
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
Year
Indonesia
Ratio of Government
Capital Expenditure
to GDP
GDP Growth Rate
Stable GDP growth supported by
domestic consumption US$1924/capita GDP
Before1998, high growth
GDP followed by high
investment on
infrastructure
5
15.32
13.67
15.61
11.70
14.08
4.88
0.00 5.00 10.00 15.00 20.00
Jabotabek
Surabaya
Medan
Makassar
Indonesia (Avg)
Japan
Logistics Costs 15.32 13.67 15.61 11.70 14.08 4.88
Jabotabek Surabaya Medan MakassarIndonesia
(Avg)Japan
Indonesia Logistics Cost
Average Indonesia Logistics Cost, 14,08% from total sales (Japan Logistics Cost is 4,8% from total sales)
6
Government Expenditure
7
Government Expenditure for Infrastructure 2005-2009 (Rp Trillion)
0
10
20
30
40
50
60
70
2005 2006 2007 2008 2009
8
Public investment has recently increased, led by sub-national spending
World Bank Jakarta, May 2010
Total investment in infrastructure by sources
0
1
2
3
4
5
6
7
8
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
% o
f G
DP
Central Sub-national SOE Private
Total investment in infrastructure by sectors
0
1
2
3
4
5
6
7
8
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
% o
f G
DP
Transports Irrigation WSS Energy Telecom
9
Investment in PPP Project (2005-2009)
10
Toll Road IPP 10000 MWWater Supply
Port Airport RailwayPPP Power
Plant
Operation 25 16 1 25 2 0 0 0
Construction 3 18 6 3 0 0 0 0
Preparation 51 118 28 24 14 7 11 6
0
20
40
60
80
100
120
140Q
UA
NT
ITY
Rp. 63.743 Trillion
Rp 52.999 Trillion
Rp 790 Billion
Toll Road
Power Plant
Water Supply
Infrastructure Development Achievement
11
Drinking Water and Sanitation
12
Drinking Water Coverage Sanitation Coverage
2004 2009 Target 2010
Realisasi 2010*
2014
Air Minum (%) 48.8 47.7 50.05 49.97 70
0
10
20
30
40
50
60
70
80
2004 2009 Target 2010
Realisasi 2010*
2014
Sanitasi (%) 38 51 54 53 100
0
20
40
60
80
100
120
Drinking Water
Sanitation
Solid Waste
Percentage of Collected Solid Waste
Cities in Indonesia produce solid waste 10 million ton/year 10 million ton of solid waste produce 404 million m3 of methane annually
18.03 18.41
20.63
16
17
18
19
20
21
2001 2004 2007
13
Electricity
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
2004 2009 Perkiraan Capaian 2010
Target 2010 Target 2014
Rasio Elektrifikasi 60.0% 66.3% 66.6% 67.2% 80.0%
Rasio Elektrifikasi Desa 89.2% 96.8% 97.0% 97.3% 98.9%
Elastisitas Energi 1.7% 1.6% 1.6% 1.6% 1.4%
Estimated Achievement
2010
Electrification Ratio
Urban Electrification Ratio
Energy Elasticity
14
Telecommunication
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
2004 2009 Perkiraan Capaian 2010
Target 2010 Target 2014
Teledensitas Total Telekomunikasi Akses (PSTN, FWA, seluler)
18.8% 86.1% 100.0% 75.0% 100.0%
Desa Berdering USO 17.2% 78.2% 90.0% 90.0% 100.0%
Jangkauan TVRI Thd Populasi 32.9% 56.8% 60.0% 60.0% 88.0%
>
Estimated
Achievement
2010
Total Teledensity
Ratio of National TV to Population
Villages Covered by USO
15
Irrigation
Irrigation Coverage
Mill
ion H
a
Planned 2010 Estimated 2010
Number of Dam
Planned 2010 Estimated 2010
16
Roads
17
-
20.0
40.0
60.0
80.0
100.0
120.0
2004 2009 Terget 2010 Perkiraan Capaian 2010
Target 2014
Lajur Km 73.6 84.6 93.1 93.1 104.7
Rib
u K
m
Estimated Achievement
2010
Th
ou
sa
nd
s K
m
Railway
18
-
50.0
100.0
150.0
200.0
250.0
300.0
350.0
2004 2009 Target 2010 Perkiraan Capaian 2010
Target 2014
Penumpang (Juta orang) 149.6 207.1 220.0 218.0 302.0
Barang (Juta Ton) 17.5 18.9 20.1 19.2 27.5
Estimated Achievement
2010
Passenger (Million People)
Freight (Million Ton)
Sea Transport
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
2004 2009 Perkiraan Capaian 2010
Target 2010 Target 2014
Domestik 54.0% 90.2% 98.0% 98.0% 100.0%
Ekspor-Impor 3.5% 9.0% 10.0% 10.0% 15.0%
Estimated Achievement
2010
19
Air Transport
20
-
20.00
40.00
60.00
80.00
100.00
120.00
140.00
2004 2009 Perkiraan Capaian 2010
Target 2010 Target 2014
Domestik 54.00 82.74 90.83 90.83 131.92
Internasional 10.80 16.10 18.08 18.08 28.75
Estimated Achievement
2010
Policy and Strategy on Infrastructure Development
21
Five-Year National Development Plan 2010 - 2014
22
Government Policy: …..To Boost Infrastructure Financing Up to 5% of GDP
2009 2010 2011 2012 2013 2014
Growth (%) 5,1 5,5 6,2 6,8 7,3 7,7
Nominal GDP (Rp Trillion) 5.206,5 5.989,5 6.718,3 7.632,3 8.611,0 9.523,3
Infrastructure Needs 5% GDP (Rp. Trillion) 260,3 299,5 335,9 381,6 430,6 476,2
Total of Infrastructure Needs (2010 – 2014) Rp. 1.923,7 Trillion (US$ 213,3 Billion)
23
Indonesia can afford to spend more on infrastructure development …because its fiscal and debt position is strong
World Bank Jakarta, May 2010
Scenario 1: Low growth 2010 2011 2012 2013 2014GDP growth (%) 3.5 4.5 5.5 5.5 5.5Budget deficit (% GDP) -1.6 -1.4 -1.1 -0.9 -0.8Public debt to GDP ratio (%) 32.9 32.2 30.8 29.3 27.8GoI gross financing needed (IDR trillion) 221 223 216 218 248
Scenario 2: Business as usual 2010 2011 2012 2013 2014GDP growth (%) 5.4 6.0 6.2 6.2 6.2Budget deficit (% GDP) -1.6 -1.4 -1.1 -0.9 -0.8Public debt to GDP ratio (%) 31.9 30.8 29.2 27.6 26.0GoI gross financing needed (IDR trillion) 224 228 223 226 258
Scenario 3: Big push 2010 2011 2012 2013 2014GDP growth (%) 5.6 6.4 6.8 7.0 7.2Budget deficit (% GDP) -2.6 -2.4 -2.1 -1.9 -1.8Public debt to GDP ratio (%) 32.8 32.4 31.5 30.4 29.2GoI gross financing needed (IDR trillion) 284 298 304 324 375
Scenario 4: Bigger push 2010 2011 2012 2013 2014GDP growth (%) 5.6 6.5 7.1 7.4 7.6Budget deficit (% GDP) -2.6 -2.6 -2.6 -2.6 -2.6Public debt to GDP ratio (%) 32.8 32.6 32.1 31.5 30.9GoI gross financing needed (IDR trillion) 284 307 343 388 463
24
Infrastructure Financing Gap
25
• Central Government budget can only cover 29.1 % of total investment need.
• Big opportunity for private investment
through PPP (Rp 668,34 Trillion or 34.7%).
7% growth target requires: Rp 1.923,7 Trillion (about US$ 213,3 billion) of investments during 2010-2014.
-
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
1,600.00
1,800.00
2,000.00
Private
344,67 T
TO
TAL
Rp
1.9
23,7
T
Extra Government
effort required to
enable private
funding.
323,67 T
SOE
340,85 T
Local Gov
355,07 T
Central Gov
559,54 T
Investment Need 2010-2014 Estimated Financing Capacity Gap
25
Strategy on Infrastructure Development in Five-year National Development Plan 2010-2014
• Increasing infrastructure’s level of service to comply with minimum standard of service.
• Supporting the improvement of real sector competitiveness.
• Enhancing Public Private Partnership:
– Shifting government role to be facilitator or enabler.
– Focus on service sustainability through efficient and effective investment.
• Dual Track Strategy:
– Developing infrastructures which accelerate goods and information flow, and
– Encouraging industrialization program through regional centers development in 6 Priority Economic Corridors.
26
Infrastructure Program Priority in 2010 - 2014
NO SECTOR PRIORITY PROGRAM
PROGRAM EXAMPLE OF PRIORITY ACTIVITY 1 Energy Renewable Energy Development Program and Energy
Conservation
Development of oil and gas infrastructure
EBT development; partnership program in the framework of energy
conservation and efficiency
2 Electricity Program of Quality and Quantity Enhancement of
Electricity Infrastructure which is Environmentally
Friendly
Development of power plant, transmission network, main
substation, distribution network, and distribution substation
Urban Electricity Development Program
Post, Telecommunication and Information Sector
Stabilization Program
3 Post, Telecommunication
and Information
Technology
Enhancement, Equality, and Development of Post,
Telecommunication and Information Infrastructure
Quality Program
Implementation of sector reformation
Development of Post, Telecommunication and Information
Infrastructure
4 Roads, and Land
Transportation
Road Services Program
Land Transportation Services Enhancement Program
Development of toll road and cross road
Development of scout land transportation
5 Sea Transportation Sea Transportation Services Enhancement Program Development of port and procurement of commercial ship
6 Air Transportation Air Transportation Services Enhancement Program Development of airport and Scout Air Transportation
7 Railways Railways Services Enhancement Program Greater Jakarta Mass Rapid Transit and Jakarta – Surabaya High
Speed Rail
8 Water Resources Water Resources Conservation Program Development of reservoir
Water Resources Utilization Program
Rehabilitation/Enhancement of Irrigation Network, land water and
swamp; bulk water fulfillment
Water Resources Damage Control Program Control of rural flood and coastal protection
9 Housing and Settlement Housing Development Program
Provision of owned and rented residential
Sanitation and Drinking Water Development Program
Drinking water provision, development of waste water system,
Settlement Quality Enhancement Program Arrangement of slum area; urban quality enhancement 27
GOI INFRASTRUCTURE INVESTMENT PLAN
State Budget (APBN)
External Loans/Grants
(PHLN)
Domestic Sources (Rupiah)
Infrastructure Financing Scheme
Blue Book
Public Private Partnership
(PPP)
Private Sector
PPP Book
PRIVATE INFRASTRUCTURE
External Financing
To fund Government priority projects with high economic and social returns such as roads, geothermal power plant
PPP
• For financially viable projects with high economic returns;
• Minimum requirement for government support and or guarantee
28
Government Guarantee
PPP Development
29
Private Participation in Infrastructure is Increasing
World Bank Jakarta, May 2010
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
US$
Mill
ion
s
Water and Sewage
Transport
Energy
Telecom
30
The Changing of Infrastructure Laws
Sectors New Laws
Telecommunication Law Number 36/1999
Oil and Gas Law Number 22/2001
Road & Bridge Law Number 38/2004
Railway Law Number 23/2007
Sea Transport & Port Law Number 17/2008
Air Transport & Airport Law Number 1/2009
Land Transport Law Number 22/2009
Electricity Law Number 30/2009
Water Law Number 7/2004
Open infrastructure industry and market for private investors
31
Economically viable Financially not viable
Economically viable Financially viable
Project Feasibility Scheme
Public
Private
Private
Private
Operation and Maintenance
Construction
1
3
Hybrid Financing
Regular PPP
Economically viable Financially Marginal Public Private
Private 2
PPP with Government
Support
Implementation of Financing Alternatives on PPP Scheme
32
Policy on PPP In Five-Year National Development Plan 2010-2014
Creating successful PPP model projects.
Implement Projects listed in PPP Book.
Strengthening PPP institution at all level of government.
Streamlining PPP process.
Proper project preparation to reduce unnecessary transaction cost.
Provide government support in state budget.
33
Agenda for PPP Development
Land:
Completion of Land Act in 2010
Provision of Land Fund in State Budget (on top of regular allocation)
Land provision by the Government:
Financially viable project Loan to project
Financially marginal/non viable project Subsidy to project
Allocation of government support in State Budget
PPP One Stop Service
Tax Holiday for infrastructure investor
Project Development Facility Revolving Fund
Exploration suitable PPP financing scheme
Guarantee Fund enhancement.
34
• Government support is divided into: • Direct/non-contingent support (including: fiscal contribution, land,
permits, tax incentive, part of construction, etc ) • Contingent support (Government guarantee).
• Government guarantee can cover one or more Contracting Agency’s obligations pertaining to:
• Government has to provide land prior to tender. However, Government has an option to reimburse land cost if the project financially viable.
Government Support for Private Investment in Infrastructure
• Land acquisition • Revenue risk
• Licenses, permits, and approvals • Demand risk
• Financial close delay/failure • Pricing risk
• Change in law/regulations • Enforcement risk
• Breach of contract • Standalone termination risk
• Integration with network
35
Creating The Environment for PPP
Land Acquisition Fund
Guarantee Fund (PT PII)
Infrastructure Fund
PT SMI – PT IIF
Private Investor
Government of Indonesia
To Promote Infrastructure Development Growth Through PPP
P3CUPDF
Financial Institution/
LenderSYNERGY
Legal and Regulatory Framework
PPP Project Pipeline
*) Almost all the PPP element are available the question are how can they synergize all the components
36
Total Investment: US$ 47,3 Billion (100 Project)
PPP Infrastructure Project Pipeline
No Sector/Sub-sector Number Project Cost
(US$ Million)
1 Marine Transportation 1 36.00
Total 1 36.00
1. Project Ready for Offer
No Sector/Sub-sector Number Project Cost
(US$ Million)
1 Toll Road 18 7,591.57
2 Water Supply 6 521.87
3 Solid Waste and Sanitation 3 220.00
Total 27 8,333.44
2. Priority Project
No Sector/Sub-sector Number Project Cost
(US$ Million)
1 Land Transportation 2 274.00
2 Marine Transportation 11 2,859.29
3 Air Transportation 7 1,557.80
4 Railways 9 9,547.30
5 Toll Road 17 19,261.33
6 Water Supply 18 1,327.50
7 Solid Waste and Sanitation 3 57.27
8 Power 5 4,045.00
Total 72 38,929.49
3. Potential Project
37
PPP Projects Ready for Transaction in 2011
No Projects Contracting Agency Investment Estimation
(US$ Million)
01 Southern Bali Water Treatment Facility Bali Provincial Government 59.1
02 Purukcahu-Bangkuang Coal Railway Central Kalimantan Provincial Government 2,100.0
03 Maros Water Supply Maros Regency 12.9
04 Tanah Ampo Cruise Terminal MoT 36.0
05 Bandung Solid Waste Management (unsolicited) Bandung City 86.0
06 Surakarta Solid Waste Management (unsolicited) Surakarta City 7.4
07 Southern Banten Airport Banten Provincial Government 85.0
08 Umbulan Water Supply East Java Provincial Government 204.2
09 Jatiluhur Water Supply MPW 189.3
10 Medan - Kuala Namu – Tebing Tinggi Toll Road Toll Road Agency 475.5
11 Central Java Independent Power Producer PT. PLN 3,000.0
12 Soekarno Hatta Airport – Manggarai Railway MoT 735.0
13 Sunda Strait Bridge Development Board for Sunda Strait Strategic Area 25,000.0
14 Pondok Gede Water Supply Bekasi City 22.4
15 Soreang-Pasir Koja Toll Road Toll Road Agency 102.2
16 Pandaan-Malang Toll Road Agency 252.8
38
PPP Projects under Preparation in 2011
No Projects Contracting Agency Investment Estimation
(US$ Million)
1 Jakarta Monorail Project Jakarta Provincial Government 496.5
2 Gedebage Integrated Terminal City of Bandung 269.0
3 Consolidated Redevelopment of Banda Aceh Terminal City of Aceh 22.7
4 Palembang Multimode Terminal City of Palembang 134.0
5 Pekanbaru Cargo Terminal City of Pekanbaru 140.0
6 Serang Water Supply City of Serang 16.9
7 Palu Water Supply City of Palu 13.5
8 Lamongan Water Supply Lamongan Regency 13.6
9 Malioboro Station Revitalization City of Yogyakarta 137.5
10 Krabayakan Spring Water Supply Malang Regency 21.9
11 South Cimahi Water Pollution Control City of Cimahi 52.2
12 Cimahi Water Supply City of Cimahi 18.5
39
National Connectivity
40
Domestic Connectivity
- Intra island
- Inter island
- International
Regional Development
National Transportation
System
National Logistic System
ICT
National Connectivity Framework
41
LOCAL Connectivity GLOBAL Connectivity
Intra-island Inter-island International
Indonesia International
Gateway
Asia
Europe
America
Town Island
Island
Island
Town
Town
Town
Town
Town
Town
Town
City
City
City
City
City
Within Growth Poles (urban)
Among Growth Poles (sub-regions)
3 Level Connectivity
VISION OF CONNECTIVITY DEVELOPMENT LOCALLY INTEGRATED, GLOBALLY CONNECTED
NATIONAL Connectivity 42
Ways to improve Intra-island connectivity: Railways
For Kalimantan and Sumatra, rail will be needed to link coal deposits to ports
Largely funded by PPP coal concessionaires
On Java, driving force for railway revitalization will be passenger services
Could be competitive with road and air transport within 5-10 years
And also open up niche opportunities for freight services between industries and their markets (Aqua)
High-speed passenger trains (>US$28 billion) are too expensive now, but upgrading passenger/freight services (<US$9 billion) makes sense
Inter-modal coordination with Trans-Java expressway needs to be sorted out, but is not a major issue
43
Ways to improve Intra-island connectivity: Roads (Trans-Java Expressway)
Trans-Java Expressway would more than half travel times between Surabaya and Jakarta: from 20 hours
to 8 hours. Link major urban centers on Java and provide access for towns and rural areas to markets.
Benefits in the transport of perishable goods throughout and from Java.
Trans-Java can make all Java ports inter-connected and thus become a gateway to international and domestic markets.
Major investment of US$5 billion to connect and upgrade 900 km of roadway
Link major urban centers on Java and provide access for towns and rural areas to markets.
15 segments shared among 9 concessionaires
Government should also acquire land (US$1.5 billion) in return for shares
Benefits to other sectors: Because of traffic congestion, trucks can make only one round trip per day from Jakarta’s main industrial sites to Tanjung Priok port. As a result, trans-shipment costs are double those in Malaysia and Thailand.
44
The projects in Java are urgent and necessary because
Successful projects can have a large poverty reduction impact
Largest poor population (approx. 20 million) is in Java, more than double compared to the second largest in Sumatra (approx 7 millions)
Successful projects can generate growth and thus fiscal revenues that can be redistributed throughout the country
The bigger the pie, the larger the slices for everyone
Need a clear fiscal transfer policy with local governments
Java is the gateway from Indonesia to the world
So the pie can be even bigger than the domestic market alone
45
Inter-island freight flow
> 100 Million Ton 50 Million – 100 Million Ton
15 Million – 50 Million Ton
1 Million – 15 Million Ton
0 – 1 Million Ton
I Billion Ton
750 Million - 1 Billion Ton
250 Million – 750 Million Ton
50 Million – 250 Million Ton
1 Million – 50 Million Ton
46
Reducing the cost of Inter-island shipping
Trend back to regulation over past decade
New Shipping Law (2008) reinforces regulatory powers, including cabotage Protects domestic industry rather than promoting domestic trade
But also simplifies licensing of shipping
And provides scope for separating port regulation and operation, and competition between terminals and ports
A lot will depend on how the Law is interpreted in regulations
Port innefficiencies are also part of the problem
47
Connecting Eastern Indonesia
Case for subsidized pioneer shipping services for Eastern Indonesia But don’t distort the whole shipping industry
Provide subsidies transparently in the budget with competitive bidding (PSO)
Doesn’t need major port development (look at the example of RO-RO services in the Philippines)
Similar arguments may apply for telecommunications Extending Palapa Ring to Papua
Building network backbone to interior
48
Six Economic Corridors Development
49
Thank You
50
