Interview: Djoko Kirmanto
What can the government do to improve investor appetite for public-private partnerships (PPPs)?
DJOKO KIRMANTO: The government has established major support facilities to bolster the realisation of PPPs, including the “One-Stop Service” and the Land Revolving Fund. The latter features several dedicated infrastructure guarantee funds, underpinned by the Viability Gap Fund. Investment is a long-term, high-risk endeavour, so the government must meet investors halfway by providing clearer regulation and a more secure licensing procedure to improve legal certainty.
Crucially, this requires complete commitment from central and regional levels of government, as both can act legally as contracting agencies for PPPs. Local government also has the authority to manage water supply and sanitation. However, as Indonesia’s experience of such projects stretches back less than 10 years, the Ministry of Public Works has established the Support Agency for the Development of Drinking Water Supply Systems (BPPSPAM) to facilitate capacity building and information sharing, and achieve successful PPPs.
How does the ministry balance funding between Java, where infrastructure bottlenecks are curtailing growth, and outlying regions, which continue to be affected by high poverty rates?
KIRMANTO: The government has increased its budget allocation for the Master Plan for the Acceleration and Expansion of Indonesian Economic Development (MP3EI) projects outside Java, particularly in Focus Investment Areas such as commodity and mineral development. In the East Indonesia region, the government has focused on accelerating construction of the three main economic corridors: Sulawesi, Bali-Nusa Tenggara and Papua-Maluku, to balance development across the country. To provide some perspective, in the Java Corridor investment amounts to Rp116bn ($12m), or 21.2% of the annual total MP3EI budget of Rp546bn ($55m). At the same time, investment funding for Papua-Maluku Islands Economic Corridor is by far the highest for 2013 at Rp205bn ($21m) or 37.5% of the annual budget. Kalimantan and Bali-Nusa Tenggara follow with Rp109bn ($11m) and Rp43bn ($4m), respectively.
To what extent does Indonesia’s future economic development depend on the successful enforcement of the 2011 Land Acquisition Law?
KIRMANTO: According to the Islamic Development Bank Survey in 2011, land acquisition is the primary obstacle to infrastructure investment. In response, the government issued several new regulations in 2012 to catalyse land acquisition for the development of public projects. These provide specific time limits for land acquisition, categorising the three main phases of the process within an overall minimum of 319 days and a maximum of 583 days. These phases include planning and preparation (141-289 days), implementation ( 141-257 days) and result award (37 days).
How can the government fast-track the Mass Rapid Transit (MRT) project while also taking into account the social impacts of land clearance?
KIRMANTO: Jakarta’s need for the MRT has never been greater. Expected to serve 173,000 passengers per day in its first year and decrease travel time by an average of 28 minutes, the MRT will reduce CO emissions by 30,000 tonnes by 2020 and create nearly 48,000 new jobs over a five-year construction period. Anticipating concerns over disruption caused by such a large project, Jakarta’s provincial government has initiated a dialogue with residents affected by land acquisition.
The government will also establish a consignment system for land acquisition, whereby individuals can appeal the amount of compensation offered to them by pursuing a just resolution in court. This arrangement was implemented during the construction of the East Flood Canal. However, social impacts must be considered alongside the first phase of development of the North-South Line, stretching from Lebak Bulus to Bundaran HI roundabout – a distance of some 15.7 km.
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