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.
Bisnis Indonesia - Penambahan Proyek Strategis Nasional: Beban proyek pemerintahan baru
19 March 2024
By Akbar Evandio
Despite his administration coming to an end soon, President Joko Widodo's ambition to pursue new projects remains undeterred. Yesterday, on Monday (18/3), the government decided to include 14 additional national strategic projects (PSNs), adding to the upcoming government's workload.
The 14 additional projects are planned to utilise financing from the private sector, not the state budget (APBN).
However, who will ensure the continued flow of capital from the private sector? Has Indonesia not experienced enough stalled projects due to capital stagnation from investors?
This is causing concern for the incoming government, which will be in office for the next five years. They are worried that the capital flow from businesses may not meet expectations.
There are also the numerous issues faced in Indonesia's investment ecosystem, ranging from permits, land acquisition, manpower, to legal certainty, all of which are concerns for the business world.
PSNs receive a different treatment from the government. However, there are still many issues in the field.
Furthermore, the government does not deny the issues that disrupt the flow of capital to strategic projects, including land-related issues.
Apart from PSNs, other projects that have been under construction for years still encounter challenges related to land and spatial planning.
Coordinating Minister for Economic Affairs Airlangga Hartarto said that 36 PSNs were set to be completed this year, but they still face issues in terms of spatial planning.
For example, Gilimanuk-Mengwi toll road and Pupuk Industrial Estate in Fak Fak are encountering environmental issues due to their involvement with customary lands.
“Hence, until the end of 2024, support from all stakeholders are required,” he said after attending a limited meeting with President Joko Widodo on PSN evaluation at the State Palace yesterday.
The situation is ironic. On one hand, the government wants to continue increasing the number of PSNs with 14 additional projects. On the other hand, there are unfinished projects.
Furthermore, several other PSNs involving the Ministry of Environment and Forestry also encounter environmental issues. This indicates that the issues are within the policymakers themselves.
Furthermore, many lands are still problematic with multiple certificates or owned by indigenous people, which complicates their development.
Agrarian and Spatial Planning (ATR) Minister/National Land Agency (BPN) Head Agus Harimurti Yudhoyono, in this context, is committed to supporting land acquisition for every PSN, including the 14 new PSNs.
The institution will also monitor conditions on the ground to ensure that land status is clear before issuing a certificate. Therefore, affected individuals can receive compensation from the state.
“So, PSN development can progress smoothly, progressively, faster, and better, but we also want to prevent issues in the future,” he explained.
Various efforts have been made to accelerate PSN development, ranging from adjusting project types to negotiating with investors to encourage investment in Indonesia.
Regulation changes
The government is also revising a regulation that serves as the basis for funding land procurement for strategic projects, namely Finance Minister Regulation Number 95 of 2023 on Amendment to Regulation of the Minister of Finance Number 139/PMK.06/2020 regarding Procedures for the Funding of Land Procurement for National Strategic Projects by the State Asset Management Agency.
In the regulation, the fiscal authority is implementing several changes to crucial substances to smooth out land procurement funding for strategic projects.
The change enhances the compensation mechanism for lands that will be made PSN locations, revises the types of land that can be made PSN locations, adds a long-term source of funding for land procurement, and provides a mechanism to utilise customary lands.
For example, concerning long-term funding, in the previous regulation, funding was sourced only from the current-year financing expenditure budget of the state treasury account to the State Asset Management Agency (LMAN) and the non-tax state revenue (PNBP).
In the new regulation, another source of funding is introduced, coming from the accumulation of remaining funds from the expenditure budget in previous years. This long-term fund will be utilised for land procurement for PSNs.
The types of land now include customary lands and public cemeteries as lands that can receive a special compensation. Therefore, the new regulation writes off the use of forest areas as a land with special characters.
The Finance Ministry acknowledges that LMAN plays a crucial role in land acquisition for strategic projects. Therefore, LMAN is allocated a state equity participation (PMN) worth Rp15 trillion in the 2024 draft state budget (RAPBN).
Before the end of President Joko Widodo’s term in October, the government is targeting to complete 29 PSNs.
The government has currently completed 195 PSNs worth Rp1,519 trillion from 2016 to February 2024 that are fully operational.
There are 77 projects and 13 projects in construction or are partially operational worth Rp2,960.7 trillion. So, the total number of PSNs constructed by the government reaches 285 projects.
An economist from Centre of Reform on Economics (Core) Indonesia, Mohammad Faisal, said that the government basically needed a large budget for land procurement.
Therefore, expanding funding sources and including customary lands are smart solutions to mitigate social unrest related to strategic projects.
“Investment will not only yield financial benefits but also have social implications. Additionally, they will help minimise environmental impact,” he said.
