Strategic project financing: Preventing budget 'obesity'
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 - Pembiayaan proyek strategis: Mencegah ‘obesitas’ anggaran
8 May 2023
By: Anitana W. Puspa & Rinaldi M. Azka
A high praise was given to the Attorney General’s Office by House of Representatives (DPR) Commission III Deputy Chairperson Ahmad Sahroni. The Adhyaksa corps is reckoned to play a major role in overseeing national strategic projects.
The Attorney General’s Office team has completed the strategic development security (PPS) activity for 80 projects worth Rp28.88 trillion. The projects consist of 4 national strategic projects (PSNs) and 76 other strategic projects.
The role of the Attorney General’s Office team in overseeing strategic projects is significantly central to ensure the smoothness of national project development and the effective use of the development budget.
“This is what we want. Prevention efforts to minimise various irregular practices,” he said in March.
Steps to prevent the misuse of the budget for PSNs or other mainstay projects are continuously focused on. Moreover, the amount of the budget disbursed for PSNs is quite large.
Based on Coordinating Minister for Economic Affairs Regulation No. 21/2022, there are 210 projects and 12 programs included in the PSN scheme.
The value of investment required for the projects reaches Rp5,746.4 trillion, which will be fulfilled from various sources, including the state budget (APBN), the regional budget (APBD), state enterprises, and the private sector.
Regarding the required financing for PSNs, the government will implement various strategies such as by prioritising their budget for projects that are expected to give a domino effect to the economy.
Budget Director General of the Finance Ministry Isa Rachmatarwata said that planning and budgeting for PSNs have been carried out thoroughly by involving stakeholders.
In the budget implementation stage, he admits that adjustments need to be made in the current fiscal year. If that condition occurs, the government has prepared a budget for specific PSNs.
“Existing PSNs are not yet optimal, but they have a multiplier effect for new economic growth. So, the budget will be strengthened and sharpened by shifting the budget from other activities of related ministries and institutions,” he said to Bisnis on Friday (5/5).
He continued that the Finance Ministry was focusing on planning and budgeting PSNs smartly by involving related stakeholders so that the allocation is efficient to achieve set targets.
The Finance Ministry and related stakeholders will regularly monitor and evaluate the budget to ensure that the PSNs are carried out smoothly.
DPR Commission XI Member from Golkar Fraction Putri Anetta Komaruddin said that the parliament was continuously overseeing PSNs funded by the APBN so that they can be completed on time.
“Especially toll road projects and Jakarta-Bandung high-speed railway that can improve connectivity and accelerate the mobility of the people,” she said on Friday (5/5).
She said that the government’s investment must be on target with the road map so that it can provide added value for the people. Especially, in terms of job creation.
“The purpose is to reduce the budget overrun risk that has the potential to increase the burden of the state budget,” Putri said.
Regarding the capability to fund PSNs, business players are garnering attention.
Arrange funding
Indonesian Employers Association (Apindo) Chairperson Hariyadi B. Sukamdani said that financing to sustain PSNs must be carried out better at the end of President Joko Widodo’s period.
According to him, several PSNs that have been built by the government prioritise equitable development, especially basic infrastructure projects. However, those projects are not attractive for business players.
“I see that the government must have a strategy to arrange funding. After constructing several toll [roads], just sell them immediately. The money can be used to construct other infrastructures. So, it can be optimised,” Hariyadi said.
According to him, the government’s role is far more significant than private companies in developing PSNs. Usually, private investors will only enter after the government has opened the door by completing the PSN or taking over economic projects.
Hariyadi hopes that PSNs in the government’s framework can be continued by the government in the next period so that there is continuity in the construction and certainty in the investment aspect.
Meanwhile, PT Bank Permata Tbk Chief Economist Josua Pardede reckoned that the large investment requirement of PSNs was a major challenge that must be faced by the government so that the projects can be completed.
He reckoned that the government could set priority PSNs that will be worked on first by considering the multiplier effect of the PSNs on the economy.
He is worried that the completion of all unfinished PSNs would increase financing that is partly provided by the APBN and state-owned enterprises (SOEs).
Moreover, several construction SOEs are facing financial challenges.
“The government needs to set a priority scale to develop PSNs that have the most significant impact on economic development,” he said.
Hence, the increase in debts of the government and SOEs can be mitigated to support a conducive economic condition.
A similar view was shared by a researcher from the Institute for Economic and Social Research (LPEM) of University of Indonesia (UI) Teuku Riefky.
The government needs to prioritise and provide a budget for PSNs that can be completed on time and boost industrial growth.
“With Jokowi’s period ending, the government needs to prioritise PSNs that can be completed on time and boost industrial growth,” he said.
On one hand, Riefky also noted that PSN development was still problematic in their execution and implementation aspects. If they are not carried out in a measured manner, the projects have the potential to be stalled.
Industrial estate development projects that can boost job creation and increase competitiveness have to be prioritised at the end of the office period.
