Infrastructure spending in 2025 may increase
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Investor Daily - Belanja infrastruktur 2025 bisa bertambah
22 August 2024
By Heru Febrianto
Jakarta, ID – The allocation for infrastructure spending in the fiscal year 2025 may increase. This aligns with the main focus of President-elect Prabowo Subianto's government programme in the infrastructure sector, supported by the availability of fiscal space.
According to the 2025 Draft State Budget (RAPBN), the total budget for infrastructure spending prepared by the government is Rp400.3 trillion, which is a decrease from this year’s allocation of Rp423.4 trillion.
In the 2025 RAPBN, the budget ceiling for the Public Works and Housing (PUPR) Ministry is set at Rp75.63 trillion, which is a decrease of 54.04% compared to the 2024 allocation of Rp164.56 trillion. Of this total budget, 38.2% is planned to support national priorities, while 51.9% is allocated to support other priorities.
Meanwhile, the budget ceiling for the Transportation Ministry in the 2025 RAPBN is set at Rp24.76 trillion, a decrease of 36.32% compared to the 2024 allocation of Rp38.88 trillion. Of this allocation, 26.5% is planned to support national priorities, while 29.0% is allocated to support other priorities.
As one of the basic programmes, Nusantara Capital City (IKN) is allocated Rp143.1 billion, as outlined in Volume II of the Financial Memo and RAPBN for 2025. This budget allocation for IKN development is relatively small compared to the overall budget ceiling for infrastructure programmes, which reaches Rp400.3 trillion.
Centre of Reform on Economics (CORE) Indonesia Economic Researcher Yusuf Rendy Manile believes that the 2025 RAPBN posture for infrastructure spending, especially regarding IKN, the PUPR Ministry, and the Transportation Ministry, is smaller compared to the total infrastructure spending budget of Rp400.3 trillion. Compared to 2024, the budget for these two ministries has significantly declined.
“However, there is still a possibility that the infrastructure spending portion in the 2025 RAPBN will increase. The main focus of the government's programme must be observed first,” Yusuf said when contacted by Investor Daily in Jakarta on Wednesday (21/8/2024).
Yusuf said that the elected government will not burden most of the State Budget (APBN) with infrastructure development. Instead, the elected government will seek alternative funding, such as through public-private partnerships (PPP) or the private sector.
“Besides that, another option is for regions to issue bonds. However, this must be carefully monitored as the process is lengthy and requires certainty. The most plausible approach is to create a creative funding scheme to finance infrastructure.,” he explained.
He added that the small IKN budget in the Financial Memo and RAPBN for 2025 depends on the elected government in the future. "It is impossible for the IKN budget to only be hundreds of billions. The current government is likely providing a wide space for the IKN budget. We need to see the main focus of the new government. Is it infrastructure or free lunch?" he added.
Provide fiscal space
Meanwhile, PUPR Minister Basuki Hadimuljono revealed that the budget for the PUPR Ministry in 2025 is set at Rp75.63 trillion to provide fiscal space for the new government.
Basuki mentioned that the budget of Rp75.63 trillion is roughly equivalent to the budget at the start of President Joko Widodo's administration in 2014.
“I opened the file for 2014, and the budget was Rp75 trillion. So, it is to provide fiscal space for the elected President to allocate. On 28 August, we will hold a meeting with DPR. Hopefully, there will be changes,” Basuki said as quoted by Antara.
Therefore, he continued, there is still fiscal space prepared by the Finance Ministry for the elected president to prioritise his programmes.
For 2025, the PUPR Ministry is allocated a budget of Rp75.63 trillion.
In the water resources sector, the PUPR Ministry will continue to construct dams and improve irrigation for 17,000 hectares. Adequate water distribution for agricultural areas requires flood control, not only in villages but also in cities.
Regarding connectivity, through the Highways Directorate General, the ministry will continue to construct 128 kilometres of national roads from Aceh to Papua. The PUPR Ministry also ensures connectivity through the construction of 48.3 kilometres of toll roads.
Through the Settlements Directorate General, the ministry will provide drinking water in both cities and villages. Similarly, they will focus on community-based sanitation while continuing sanitation activities in urban areas.
Through the Settlements Directorate General, the PUPR Ministry will also construct settlement areas, buildings, and madrasah schools.
Meanwhile, with an allocated budget of Rp4.53 trillion for housing construction, the PUPR Ministry will continue to build vertical housing and flats to achieve the construction target for low-income citizens.
Boosting foreign investors
As his administration approaches its end in October 2024, Indonesian President Joko Widodo is asking the newly appointed Investment Minister, Rosan Roeslani, to accelerate foreign investment in IKN.
“Investment in IKN is expected to come not only from local investors but also from foreign investors. Given my background in investment, we need to encourage foreign investors to be more active, as local investors have already entered," Rosan said after meeting with the President at the Presidential Palace in Jakarta on Tuesday (20/8).
Rosan mentioned that foreign investment is expected to come in, particularly from countries that frequently invest in Indonesia and are already familiar with the investment climate, such as Singapore and others.
Previously, President Jokowi stated that investment for IKN development has reached Rp56.2 trillion from 55 investors who have already conducted groundbreaking activities.
At the groundbreaking ceremony for the first branch office of Bank BCA in the Central Government Core Area (KIPP) of IKN, the President highlighted the high investment interest in IKN. This is evident from the letters of intent (LoI) received from 472 investors. After being curated by the IKN Authority, 220 LoIs were deemed suitable for investment in IKN.
“We expect these 220 investors to be selected by the Head of the IKN Authority to realise their investment in IKN. Even though foreign investors are interested, we are prioritising domestic investors first, then foreign investors,” Jokowi stated.
