We attended the first day of the Infrastructure Asia 2010 “Breaking down the barriers to Public-Private Partnerships” hosted by the Government of Indonesia in Jakarta, in association with World Bank, and ADB. The conference also features exhibitions by 129 companies.
The conference was inaugurated by President SBY, and at the same time the new PPP (Public-Private Partnerships) book 2010 was also launched.
Total projects offered are 100 with US$47.3bn total estimated investment cost. 35 projects are toll-roads (US$26.8bn), 12 projects related to marine transportation and the rest are power, other transportation projects, water supply, and waste management.
Total investment needs for infrastructure in Indonesia is US$143bn (2010-2014), out of which government budget is 35% (US$50bn) and 65% (US$93bn) from private participation.
PLN to have Central Java Power Plant IPP as “Model PPP”. This means the 2,000MW project will be implemented under PPP regulatory framework. The project is expected to be commercially in operation in May 2015 (execution of project agreements will start Nov 2010). PLN has appointed IFC as the transaction advisor.
Key takeaways from the day’s seminar:
President SBY’s inauguration speech addressed that while many things are yet to be done, there have been good achievements in Indonesia’ infrastructure. He gave some examples such as: wireless connection increased to 140m from 12m in 2004, and internet users increased to 30m from 8m over the period.
Presidential Decree 13/2010 to ease investment process. This decree was launched early this year and it amended the previous regulation in 2005 governing the PPP implementation. Specially, it stipulates that: central or local government has to acquire land, before a PPP infrastructure project is put out for tender. Thus, the objective is to relieve investors from cumbersome land acquisition process and expediting the whole project.
Government provides guarantees for PPP projects, through a dedicated guarantee institution under the Ministry of Finance (more below). The policy has shifted throughout the years toward better guarantee management. Government guarantees PLN as the off-taker for the electricity produced by PPP.
Finance Minister Sri Mulyani gave a lively presentation addressing recent policy changes:
· MOF increased budget for Land Revolving fund from Rp1.4tn to Rp3.7tn this year. Land Capping fund is also going to continue, with Rp4.9tn allocated for 5 years until 2013.
· After the launch of Land Revolving Fund, and Land Capping Fund about 2 years ago, the government recently launched Infrastructure Guarantee Fund under the MOF. The guarantee covers political risk, project performance risk, and demand risk. Initial capital is Rp1tn, proposed to be extended to Rp3.5tn. The MOF will ensure IIGF’s capital to cover guarantees. IIGF is the Single Window for requests for guarantees. IIGF will provide guarantees only risks for which Contracting Agency (such as PLN) is responsible.
· The government also established Infrastructure Fund through PT Indonesia Infrastruktur Financing (IIF), a subsidiary of SMI (Sarana Multi Infrastruktur) which aims to help investor get domestic financial support in terms of lending and equity with contribution from IFC, and ADB. Initial capital is Rp1tn, with additional Rp1tn in 2010.
· Government still has to put a lot of works on reforming judicial system, bureaucracy system to further support the infrastructure development.
· She also urged that there needs to be a balance of risk-taking between government and investors. It cannot be that investors want zero risk but still demands maximum return.
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