Infrastructure Developments in Indonesia – Key Improvements and Priority Projects
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Infrastructure Developments in Indonesia – Key Improvements and Priority Projects Roundtable Discussion on Infrastructure Investment Opportunity in Indonesia Wahyu Utomo Acting Deputy Minister for Coordination of Infrastructure and Regional Development, CMEA and Chairman of KPPIP Implementation Team Rainier Haryanto Program Director KPPIP London, 15th July 2016 Presentation Outline Indonesia’s Infrastructure Targets Recent Reforms for Infrastructure Acceleration Committee for Acceleration for Priority Infrastructure Delivery (KPPIP) National Strategic and Priority Projects 2 Presentation Outline Indonesia’s Infrastructure Targets Recent Reforms for Infrastructure Acceleration Committee for Acceleration for Priority Infrastructure Delivery (KPPIP) National Strategic and Priority Projects 3 Indonesia has determined its infrastructure targets for the period of 2016 – 2019 which were stipulated in the National Medium Term Plan Logistic Related Banda Aceh Sea toll concept as a means to Miangas Belawan support Indonesia in becoming the Kuala Tanjung world maritime axis. Maratua •develop 24 new seaports Pontianak Dumai Bitung •increase number of substantial Batam Singkawang Pohuwato vessels (pioneer cargo, transport Maloy Halmahera Padang vessels, pioneer crossing vessels) Muara Jayapura Pangkal Teweh Tojo Una- Sorong •develop 60 crossing ports Una Enggano Pinang Taria Banjarmasin Sultan Palangkaraya Ambon Hassanuddin Namniwel Kenyam Aboy Strengthen connectivity through air Panjang Makassar Tj. Priok transport infrastructure Tj. Perak development Kertajati Merauke Koroway • develop 15 new airports Cilacap Batu Moa • develop air cargo facilities in 6 Lombok Location of 24 new seaports & locations Kupang 15 new airports Source: Bappenas • increase number of pioneer airplanes Improve transport efficiency by road Reduce logistic cost by improving railway Develop urban transport development and maintenance infrastructure • develop Bus Rapid Transit •develop 2,650 km of new roads develop new tracks in Java, Sumatra, (BRT) in 29 cities •develop 1,000 km of new toll roads Sulawesi, and Kalimantan: • develop Mass Rapid Transit •rehabilitate 46,770 km of existing road . 2,159 km inter-urban railways (MRT) in 6 metropolis and 17 . 1,099 km urban railways large cities. Energy Related Achieve electrification ratio of 96.6% by Achieving food sovereignty through Ensure efficiency of fuel production 2019 through generating capacity irrigation system improvement by optimizing improvement • develop 33 new dams and 30 domestic refineries •develop power plants with total capacity hydropower plants •build new oil refineries of of 35,000 MW • expand 1 million ha irrigation system 2x300,000 barrels • rehabilitate existing irrigation system •Expand existing refineries in Cilacap and Balongan 4 To achieve those targets, Indonesia requires an estimated investment of USD 368.9 Billion Infrastructure Projects Investment Needs by Sector (2015-2019) In USD billion SECTOR State Budget Regional Budget SOE Private/PPP Total Roads 20.6 15.4 5.0 15.4 56.4 Railways 7.2 - 0.8 9.4 17.4 Sea Transportation 20 - 18.3 7.2 45.5 Air Transportation 4.9 0.4 3.8 1.9 11.1 River Transportation & Ferries 2.8 - 0.8 - 3.6 Urban Transportation 4.7 1.2 0.4 0.4 6.6 Electricity 9.2 - 34.2 33.5 76.9 Oil & Gas 0.3 - 11.7 27.1 39.0 Information & Communication Technology (ICT) 1.2 1.2 2.1 17.2 21.5 Water Resources 15.1 5.2 0.5 13.8 34.7 Drinking Water & Sanitation 10.1 15.2 3.4 2.3 31.0 Housing 14.2 3.4 1.0 6.7 25.2 Total funding needs 110.3 42 82 134.9 368.9 Allocation percentage 29.88% 11.37% 22.23% 36.52% 100% Source: BAPPENAS (FOREX 1 USD=Rp 13,000) 5 Presentation Outline Indonesia’s Infrastructure Targets Recent Reforms for Infrastructure Acceleration Committee for Acceleration for Priority Infrastructure Delivery (KPPIP) National Strategic and Priority Projects 6 The Government has enacted various reforms to accelerate infrastructure provision Fiscal reforms Institutional reforms Regulatory reforms • Investing in Indonesian infra- • Lack of leadership to • Indonesian regulatory corpus structure has been regarded implement the changes has been characterized by as risky needed some ambiguities and • Uncertain returns on conflicting regulation investment. Before • Did not have any fiscal mechanisms to support the infrastructure investment Indonesia now has fiscal Institutional strengthening covers Revised regulations on: supports establishment and empowerment of: • Public Private Partnership (PPP); •KPPIP (Committee for Acceleration •Viability Gap Funding • Availability Payment; of Priority Infrastructure Delivery). (VGF); • Direct Lending; •Empowerment of PT. SMI and IIGF • Land acquisition; and After •Availability Payment; •PPP Unit under Ministry of Finance. • Other deregulations as listed in the •Land revolving fund; and Economic Policy Packages. •Risk-sharing scheme. Supported by improving awareness of Indonesian infrastructure issues, convergent reforms are building a better business environment for tomorrow’s investment 7 Reformations along the project life cycle aim to encourage and accelerate infrastructure projects using the Public Private Partnership (PPP) scheme GOVERNMENT OF INDONESIA Project Viability Gap Land Guarantee Tax Facilities Availability Development Funding Acquisition Fund Payment Facility (PDF) (VGF) Preparation Bidding Process Construction A facility A facility with Guaranteeing MoF Reg. No. A scheme in which A facility to contributing to contribution government's 159/PMK.010.20 concessionaire support land assist GCA on to contractual 15 re: tax holiday receive sum of acquisition for PPP project construction obligations under for pioneer money periodically infrastructure preparation cost to infrastructure sector, such as from government projects (PDF&TA) increase concession base metal, oil after the particularly on project agreements refinery, basic completion of an the private financial petrochemical, asset. sector projects. viability Ministry of Finance Managing Managing Managing entity: machinery, Managing entity: Regulation on entity: entity: Indonesia renewable Ministry of Availability KPPIP, PT Ministry of Infrastructure energy, & telco Finance; Ministry Payment has been SMI and PT Finance based Guarantee Fund equipment of Agrarian and ratified. IIF, Ministry of on GCA (IIGF) – wholly industries, which Land Finance under proposal owned by MoF will be further Spatial/BPN expanded. its new PPP Govt’s Managing entity: Unit commitment: Govt’s Ministry of Finance Govt’s 49% max per commitment: Managing entity: commitment: project US$ 450 Mil Ministry of Finance US$ 12 Mi (only for 2016) 8 Project Development Facility is to boost private sector participation in various stages of infrastructure preparation Private Sector Roles Improved Support for Private Sector • Propose unsolicited projects • The Public Private Partnership Presidential Regulation no 38/2015 provides incentives for unsolicited projects • Prepare OBC (Outline Business Planning • New procurement regulation and OBC Case) and other planning facilities from KPPIP and Bappenas documents • Debottlenecking support • Prepare FBC (Final Business • New procurement regulation and PDF/TA Case) facilities from PPP unit under MoF • Direct appointment allowed for investors that propose power projects, which have acquired the • Provide Transaction Advisory land Preparation • Land acquisition regulations provide certainty and • Acquire land* acceleration • Land Bank • Debottlenecking support • Design and construct • Fiscal support and guarantee from MoF infrastructure and IIGF to improve project bankability Implementation • Availability payment from state and regional budgets for construction, • Operate and maintain operations and maintenance infrastructure • Long-term financing by PT SMI and PT IIF 9 The Ministry of Finance has issued the regulation on Availability Payment with the objective of improving project attractiveness to investors Availability Payment Availability Payment enables private Revenue participation when the infrastructure is not commercially viable and the demand risk is high. The government adopts this scheme to achieve these goals: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 •Ensure service quality for users •Improve Value for Money for Operation and Maintenance Cost government Construction •Provide attractive return for private Cost sector providers Legal Basis Presidential Regulation no. Stipulates Availability Payment as one funding scheme for infrastructure development. 38/2015 Ministry of Finance Regulation Regulates the criteria for projects that can be funded by Availability Payment and the no. 190/PMK.08/2015 implementation of the scheme. Ministry of Home Affairs Will stipulate on budgeting system for Availability Payment funded by regional budget. Regulation (on progress) Land Acquisition Policy - Law No. 2/2012 aims to accelerate land acquisition and it has been implemented successfully Hand over of Planning Preparation Implementation land rights Time span in working days (Assuming there will be objections from land owners): Unregulated Max. 289 days Max. 257 days Max. 37 days TOTAL 583 DAYS If there is no objection from the land Has been successfully applied in Trans owners, total days needed could be Sumatera Toll Road, Palembang – speeded up to around 15 – 20 % of Indralaya section maximum days above. Implementation of Law No. 2/2012: Successful case of the • The best example of a successful BPN as central agency in implementation of implementation of the New Law