Interview: Basuki Hadimuljono
To what extent is the government prioritising private sector participation, notably foreign contractors, in new construction projects?
BASUKI HADIMULJONO: The government is encouraging private sector participation in the construction sector in particular. For this reason, the Ministry of Public Works and Housing (MPWH) established a regulation in May 2018 dictating that state-owned construction service providers are not to participate in public tenders with a value of less than Rp100bn ($7.1m), with the exception of national strategic projects. Moreover, for projects worth Rp25bn–50bn ($1.8m-3.5m), service providers are obliged to subcontract work to micro-, small and medium-sized enterprises (MSMEs). For projects worth more than Rp50bn ($3.5m), it is further obligatory to subcontract and nominate service providers that are MSMEs or local cooperatives in the bidding documents. According to Presidential Regulation No. 16 of 2018, foreign construction service providers can also participate in tenders, given that they cooperate with local companies and domestic industries in the provision of spare parts.
Considering Indonesia’s affordable housing shortfall, how is the government collaborating with the private sector to narrow the gap?
HADIMULJONO: The government will continue to strive to meet the target of the “One Million Houses” (OMH) programme through a variety of simple home ownership assistance schemes. To achieve the aims of the OMH Programme, the government is not only pursuing increased quantity of housing, but is also focusing on improving the quality of homes. In this regard, the subsidy budget for modest houses built by developers across Indonesia will be raised. To maintain the quality of subsidised houses, the MPWH has compiled a rating of housing quality with “good” set as the required benchmark. Once this quality level is reached, the ministry will provide assistance for public infrastructure and facilities improvement, including the construction of road drainage systems.
What additional tools could the government deploy to further boost the construction sector?
HADIMULJONO: Public-private partnerships (PPPs), most notably viability gap funds and availability payments, are at the helm of improving public infrastructure. Investment incentives are being given to businesses that implement infrastructure development under the PPP scheme.
In this regard, foreign investors are often encouraged to operate in regions or industries that have a particular need for investment. Incentives are also provided to foreign investors who introduce new technology to the infrastructure sector. It is now more straightforward to obtain business permits through the recently introduced online single submission system (OSS): all permits, including business licenses for construction services, can be easily obtained through the OSS web platform.
As Indonesia continues to convert formerly rural areas into urban settlements, how can delivery of basic services be expanded to all Indonesians?
HADIMULJONO: The key to ensuring that basic services are expanded to all regions, and integration of these services is facilitated, will be reducing disparities between regions and increasing their competitiveness. This is one of the core principles of the MPWH development infrastructure. To achieve this, similar programmes should be implemented in synchronisation throughout different areas, applying to a variety of urban and rural locations. Both a master plan and development plan have already been created to address potential rural priority areas in order to help standardise the implementation and delivery of basic services within these areas.
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