Indonesia records the largest infrastructure costs



JAKARTA. Compared to other ASEAN countries, Indonesia has the greatest gap in infrastructure funding. Hongkong and Shanghai Banking Corporation (HSBC) estimated that infrastructure sector needs to secure US$ 1,162 billion, but the fund is available only at US $ 441 billion.

In other words, Indonesia still needs up to US$ 721 billion of infrastructure funds by 2030. This gap is much higher than in other ASEAN countries, such as the Philippines, Vietnam, Malaysia, Thailand, and Singapore. According to the report of HSBC, Singapore even booked a worth of US$ 27 billion surplus in infrastructure funding by 2030.

Managing Director, Co-Head of Infrastructure and Real Estate Group Asia Pacific Global Banking HSBC James Cameron said that Indonesia actually has been increasing the budget for infrastructure during the recent years. However, the bureaucracy constrain has interrupted the budget absorption.


At the same time, banks were less encouraged to involve in the infrastructure projects due to the lack of preparation in the projects. “A lot of projects are not bankable”, he said. Let alone, land acquisition is still a serious problem in Indonesia.

However, Cameron said that HSBC still has commitment to fund a number of infrastructure projects, including power plant construction, energy, and mining projects.

HSBC even claimed to lead syndication for funding the construction project of Jawa 7 power plant, with has a capacity of 2,000MW. The project has settled financial close in 2016.

Cameron said that the problem of the gap in infrastructure budget is not unique to Indonesia. HSBC estimated that in 2013 the six ASEAN countries needed a total of US$ 2.1 trillion to fund the infrastructure development. However, the realization was only US$ 910 billion.

Minister of National Development Planning/Head of National Development Planning Agency Bambang P.S. Brodjonegoro admitted that Indonesia is still struggling to realize the infrastructure projects.

One of them is related to the funding mechanism under the scheme of Public Private Partnership (PPP), as a number of projects, which are funded under the scheme of PPP, did not run according to plan.

If this problem is not resolved immediately, the role of infrastructure in economic growth will not be maximized. Let alone, the government will offer a number of infrastructure projects for cooperation with the private sector in 2107.

Deputy of Facilities and Infrastructures at National Development Planning Agency (Bappenas) Adi Suryabrata added that the government will offer a worth of IDR380 trillion investments to the private sector. “There will be a worth of Rp 300 trillion toll road projects, as well as a worth of Rp 70 trillion-Rp 80 trillion energy projects", he said.

Minister of Public Works and Housing Basuki Hadimuljono added that the government will offer some of toll road projects, including Trans Sumatra toll road project, to private sector.

(Muhammad Farid/Translator)

Editor: Dupla Kartini