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INDONESIA: Private Sector Financing Sought for National Infrastructure Projects

The government is looking to stimulate private infrastructure financing through its Government and Business Entity Cooperation (KPBU) initiative ˗ its Public-Private Partnership (PPP) scheme ˗ and its Non-State Budget Infrastructure Financing (PINA) programme.

In order to make such projects attractive to the private sector, several fiscal and non-fiscal incentives are on offer under the KPBU scheme. These include viability gap funding, cash support and an availability payment mechanism, which allows a business to be directly compensated by the government once any infrastructure work is completed.

The PINA scheme has more of a focus on securing the participation of fund managers, including insurance companies and pension funds. To this end, three alternatives are on offer to investors – acting as both funder and project manager (The Greenfield System); acting as project managers as well as funders through the issuance of bonds etc (The Brownfield System); and divesting the project (The Operation System).

Overall, the Indonesian government plans to spend US$352.9 billion on infrastructure in the years up to 2019. Only some 40% of the funding will come from the state, however, with the shortfall expected to be made up via private financing.

Content provided by Picture: HKTDC Research
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