Strategic projects worth thousands of trillions accelerated in a year
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 - Proyek strategi ribuan triliun dikebut dalam setahun
14 July 2023
By: Arnoldus Kristianus
Jakarta - The government completed 158 national strategic projects (PSNs) worth Rp1,102.6 trillion from 2016 to 11 July 2023. Meanwhile, PSNs that are not yet completed or still in construction reach 58 projects with a total investment value of Rp4,643.8 trillion.
“Until 11 July 2023, there were 158 projects [completed] worth Rp1,102.6 trillion. They are accumulated from 2016 to 11 July 2023,” Deputy for Coordination of Regional Development and Spatial Planning of the Coordinating Ministry for Economic Affairs Wahyu Utomo said at the media gathering at Coordinating Ministry for Economic Affairs Office in Jakarta on Thursday (13/7/2023).
Until 2024 or at the end of the term of office of President Joko Widodo (Jokowi), the government is targeting to complete 210 projects and 10 programmes that are PSNs worth Rp5,746.4 trillion.
Specifically in 2023, the government is targeting to complete 30 PSNs worth Rp288 trillion. Until 11 July 2023, there were five PSNs completed. The PSN that was recently inaugurated is Cileunyi-Sumedang-Dawuan (Cisumdawu) toll road that was inaugurated on 11 July 2023.
In the future, Wahyu said that more PSNs were expected to be completed so that the younger generation can utilise the infrastructures that have been built optimally. “This year, we are targeting 30. Five have been completed. So, we expect to complete 25 more projects by December 2023,” Wahyu said.
In 2024, the government is targeting 31 projects (besides industrial estates) worth Rp172 trillion to be completed. “Next year, there are still projects. Hopefully, around 31 projects can be completed,” Wahyu stated.
Wahyu said that the government was encouraging the involvement of the private sector in PSNs. One of the efforts is to implement the public-private partnership (PPP) scheme. By using the scheme, it can be seen which project is suitable for which private company based on their capabilities, especially in relation with handling PSN construction risks.
“So, these problems are the most crucial to be identified in the preparation stage, such as land procurement, financing, and licensing. Hence, in the Job Creation Law, we fix all the process, including the land procurement process so that the people do not feel ripped off. How to accelerate the process while still providing suitable compensation in accordance with the people’s expectations,” he stated.
Based on Coordinating Minister Regulation No. 21/2022, there are 210 projects and 12 programmes that are included as PSNs scattered from Sabang to Merauke. The estimated investment value of the PSNs is Rp5,746.4 trillion with 67.5% provided from private companies, 19.7% from state-owned enterprises (SOEs)/regional state-owned enterprises (BUMDs), and 12.8% from the state budget (APBN)/the regional budget (APBD).
In detail, there are 45 projects in North Sumatra worth Rp834.2 trillion, 83 projects and 1 programme in Java worth Rp2,027.2 trillion, 13 projects in Kalimantan worth Rp238.1 trillion, 18 projects in Bali and Nusa Tenggara worth Rp45.5 trillion, 25 projects in Sulawesi worth Rp352.5 trillion, 15 projects in Maluku and Papua worth Rp596.7 trillion, and 11 projects and 11 national programmes worth Rp1,652.4 trillion.
Synergy required
Indonesia Chamber of Commerce and Industry (Kadin) Executive Director Hotasi Nababan emphasised the importance of synergy among the government, private companies, and the people in infrastructure construction. Until now, there have been many businesses that are hindered by land acquisition, licensing, and technical issues, so construction takes longer and costs more than planned.
“Hence, the interest, borrowing costs, and overhead of the project increased. Nobody minds if it is a government project, but it will be difficult for private companies. They have their own money that they are investing in in the infrastructure, so it will be difficult if construction is delayed,” Hotasi said.
Kadin Public Works, Public Housing, and Infrastructure Deputy Chairperson Insannul Kamil said that PPP would reduce the risk for businesses that will be involved in PSNs. Moreover, infrastructures are the main instruments that boost economic realisation.
“We have the target of 2045 Golden Indonesia, and the involvement of the private sector is increasing as PPP is intensely boosted by the government with various incentives,” Insannul said.
Wahyu added that President Jokowi provided an instruction to complete PSN construction, which can be achieved by resolving licensing issues, accelerating land procurement, and accelerating financing.
“There are three conditions asked by the President, which are available funding, land procurements that are mostly completed, and completed licensing. What else if they are all available? They have to be worked on,” Wahyu said.
He revealed that, among the 58 PSNs, the ones that have not been constructed were Cikarang-Balaraja route of East-West MRT, Jakarta-Surabaya semi-high-speed railway, New Ambon Port, toll segments of Trans-Sumatra toll road, Bogor-Ciawi-Sukabumi (Bocimi) toll road that will be continued to Sukabumi, and Gedebage-Tasikmalaya-Cilacap (Getaci) toll road.
“The first stage of Getaci [toll road] will be continued to Tasikmalaya. So, everything will be accelerated. Please pray so that the three things asked by the President can be completed by the ministries and the institutions,” he stated.
Not all are interesting
Previously, Centre of Economic and Law Studies (Celios) Executive Director Bhima Yudhistira stated that not all PSNs could attract investors. Amid the fluctuating global economy, investors will implement tighter due diligence in making foreign capital investment (PMA).
“It is normal for investors to be interested in PSNs based on the internal rate of return offered, the commercial scheme, or the concession period. There are also [investors] wating for the elections to be over as the time frame of infrastructure projects is long, so they are sensitive to political leadership issues,” he explained.
Regarding abandoned PSNs, Bhima told a story about KIPI Maloy in East Kalimantan that has been offered to investors since 2015. “However, it has not received any investment. Sometimes, the problem is not only fiscal incentives, but also regional bureaucracy, land lease, human resource supply, and inadequate supporting infrastructures,” he explained.
