Indonesia: Finally taking public-private partnerships seriously?

Former Tokyo Metro 6000 series EMU set 6115 at Gambir Station in Jakarta, Indonesia, on a KRL Jabotabek commuter serviceFormer Tokyo Metro 6000 series EMU set 6115 at Gambir Station in Jakarta, Indonesia, on a KRL Jabotabek commuter service. Photo courtesy DAJF

By: Ardi Wirdana

The Indonesian government has found grappling with the complexity of Public-Private Partnership (PPP) infrastructure projects difficult. Government officials admitted at an 2016 Infrastructure Outlook talk in Jakarta on Wednesday that this complexity is one of the reasons resulting in slow infrastructure development. However, ministers and other government officials on the panel vowed to improve the standards and quantity of infrastructure in the country. The panel consisted of National Development Planning Minister Sofyan Djalil, Finance Ministry’s Director General of Finance and Risk Management Robert Pakpahan, Coordinating Economic Minister Darmin Nasution and Agrarian and Spatial Planning Minister Ferry Musyidan Baldan.

Since his election as president, Joko Widodo, has made infrastructure development a priority. Yet infrastructure progress has been sluggish so far. Some experts and government officials attributed the underperformance to the state’s lack of infrastructure funding.

The government says that Indonesia needs around Rp 5,500 trillion (US$ 410 billion) in investment for infrastructure projects for the next five years. This is a far from what is supplied in the state budget of Rp 300 trillion at the moment. Teaming up with the private sector is an obvious solution, but it is something that the government admitted has not been as straightforward as hoped.

Robert Pakpahan, Director General of Finance and Risk Management of the Ministry of Finance said that infrastructure projects have been slow because PPP projects are “more complicated by nature”.

“The reality is that when we involve private parties, the consequence is that things become more complicated. If we build our home with our own money it’s easy, but when we ask someone else to build it and promise them we’ll pay at the end of it, there will be agreements, payment schemes and so on,” he said in a discussion on 2016 Infrastructure Outlook.

Mr Pakpahan explained that PPP infrastructure problems are nothing new as they are also found in a number of other countries. However, he assured that Indonesia will be looking to emulate the PPP successes of countries like Canada, which he said was down to all parties acknowledging and accepting the consequences of PPP.

“Our government has also accepted the consequences of PPP. We have been providing funding, guarantees, and helping with project preparation by hiring experts. These are the concrete steps we are taking,” he added.

A Hands-on President

Indonesia president Joko Widodo shakes hands with China President Xi Jinping on his visit to Jakarta in April 2015

Indonesia president Joko Widodo shakes hands with China President Xi Jinping on his visit to Jakarta in April 2015. Photo courtesy Indonesian Ministry of Trade. PHOTO: Indoneisan Ministry of Trade (

Also speaking at the Infrastructure Outlook discussion, National Development Planning Minister Sofyan Djalil assured the audience that the development of infrastructure is in good hands and therefore will definitely see some marked improvements this year.

The minister for national development and planning, who has previously had experience in four different ministerial posts, said that President Jokowi has shown incredible commitment towards infrastructure and is determined to make things right.

“Lucky to have a president who is so committed”

“I am a veteran minister. I am in the position of giving testimony and I can say that we are lucky to have a president who is so committed,” he said.

“The president is so hands-on with these projects, so much so that for a number of projects he himself leads the meetings to troubleshoot the problems,” he added.

Sofyan said that the president has instructed for the problems related to infrastructure to be resolved one by one.

The problems of overlapping regulations and permits, which has caused a number of projects to be delayed and even stall, has gradually been addressed by the government through the issuance and implementation of economic policy packages.

The government is also looking to improve the quality of project preparation and planning. This has been one of Indonesia’s biggest weaknesses in infrastructure development. Sofyan said that project preparation has always been poor for all government projects not just PPP projects, mainly due to a lack of funds. To overcome this problem, the National Development Planning Agency (Bappenas) has allocated US $ 150 million solely for project preparation.

To ensure excellent project preparation, the government says it is committed to hiring professional consultants with international quality and proven experience in handling infrastructure projects. This effort will hopefully make the projects more viable when presented and sold to investors.

Committee is a “signal of intent”

To help speed up the development of infrastructure, the president and his cabinet have formed a special team dedicated to this task called the Committee for Acceleration of Priority Infrastructure Delivery (KPPIP). The committee was formed in 2014 to revitalise and strengthen the function of a similar body formed under the previous government with a similar name: the Committee for Infrastructure Development Policy (KKPPI).

The job of the KPPIP will include the following: setting quality standards for pre-feasibility studies, assigning a list of priority projects, preparing schemes and funding sources for priority projects, monitor and eliminate bottlenecks and set strategies and policies in the infrastructure sector.

KPPIP commenced operations in late 2015 and has an initial target of 30 infrastructure projects to be completed by the end of the government’s term in 2019. Unlike most government committees, KPPIP has been granted a 5-year budget by the government.

Its day to day operations are managed by the program management office, to be headed by a seasoned professional from the private sector as the program director, and supported by a small team of project directors hired from both the public and private sectors.

Darmin Nasution, the Coordinating Minister for Economic Affairs, is the chairman of KPPIP. He is supported by the minister for national development planning (Bappenas), the minister for finance, and the minister for agrarian and spatial planning/national land agency. These key ministers have been specifically chosen by the president to reflect their central roles in ensuring the delivery of the projects.

Darmin said that the formation of the KPPIP was a “signal of intent” by the government and a sign of better things to come with regard to infrastructure development in the country.

“The government is very serious about KPPIP and this long term funding commitment and hiring of professional management is a clear demonstration of the government’s commitment” said Darmin Nasution.