New Scheme for Private Infrastructure Financing
Infrastructure development is a crucial prerequisite for Indonesia to achieve developed country status. Historically, infrastructure development, both physical and non-physical, has been heavily dependent on the State Budget (APBN), which unfortunately has limitations.
For example, the 2025 State Budget Bill allocates Rp400.3 trillion for infrastructure development, focusing on sectors like education, healthcare, connectivity, food, energy, and the new capital city. However, this budget can only support an infrastructure stock ratio of 49% of Gross Domestic Product (GDP).
To address this, the government is continuously seeking to enhance infrastructure financing schemes through creative methods that involve private sector participation, as stated by Coordinating Minister for Economic Affairs, Airlangga Hartarto, during the launch of "Regulations on Creative Financing for Infrastructure Development" in Jakarta on Wednesday (28/8/2024).
In this regard, the Coordinating Ministry for Economic Affairs, together with relevant ministries and agencies, has finalized the development of creative financing regulations, which include the Limited Management Rights (HPT) scheme and the Regional Value Capture (P3NK) scheme.
The HPT scheme, also known as asset recycling, optimizes State-Owned Assets (BMN) and State-Owned Enterprises (BUMN) assets to secure external funding for infrastructure development. Meanwhile, the P3NK scheme is a region-based financing approach that enables infrastructure development to be funded through the utilization of land value appreciation resulting from government investments, activities, and policies in a particular area.
These innovative financing schemes, modeled after successful implementations in countries like Australia, the UK, Hong Kong, and Japan, are expected to attract greater private sector investment and participation in national infrastructure projects.
"Innovation in financing is crucial to ensure the sustainability of national infrastructure development. Creative financing regulations are designed to incentivize and mobilize private sector investment," emphasized Coordinating Minister Airlangga.
By providing legal certainty and attractive incentives, the government aims to increase the private sector's interest in financing and managing infrastructure projects. The implementation of these new financing schemes will require additional derivative regulations to ensure their effective execution.
Four infrastructure projects have been selected as pilot cases for the application of these creative financing schemes, including the Lematang-Panjang Port (Lampung) and Rengat-Pekanbaru (Riau) toll roads on the Trans-Sumatra Toll Road (JTTS), the Batam-Bintan Bridge (Riau Islands), and the Semarang Harbour Toll Road. The P3NK scheme will be integrated with the existing Public-Private Partnership (PPP) framework for these projects.
The event was attended by representatives from the Australian Embassy's Economic Counselor, the Indonesia-Australia Infrastructure Partnership (KIAT), the Macro and Financial Economic Coordination Deputy, the Secretariat of the Procurement Policy Agency, as well as officials from various ministries, agencies, and local governments.
