JAKARTA. The commitment of the administration of Jokow Widodo Jusuf Kalla (JKW-JK) to boost infrastructure projects should be appreciated. Unfortunately, the lack of budget becomes major challenge to implement the commitment.

Even though government continues to increase the amount of budget for infrastructure sector, the actual needs to fund the infrastructure projects are much more beyond the governments’ ability. Thus, into what extent the government should bear all the expenses?

The budget allocation for infrastructure sector has increased from IDR177.9 trillion in 2014 to IDR317.1 trillion on 2016 State Budget. The government even plans to increase the budget allocation for 2017 to IDR346.6 trillion. However, the budget allocation is insufficient to fund various national infrastructure projects.

Due to the lack of funds, government targets to find other funding resources, mainly from private sector. “State are unable to cover all infrastructure projects expenses by themselves”, said Deputy of Analysis and Management for Strategic Economic Issues at Presidential Staff Office Denni Purbasari.

In order to find alternative funding resources, the government created the scheme of government and private sector partnership. Under the scheme, state owned enterprises (SOEs) are appointed to run government projects. Government also seeks loans from infrastructure financial institutions abroad.

Director of Facilities and Infrastructure Affairs at National Development Planning Agency (Bappenas) Wismana Adi Suryabrata said that government has listed the plans of infrastructure projects, which will be funded under the scheme of blue book for the period of 2015-2019. “The blue book scheme includes a total worth of US$42.27 billion projects”, Wismana said.

Furthermore, Ministry of Public Works and People’s Housing also plans to create public-private partnership (PPP) Center. The establishment of the center aims at finding alternative funding resources for various government’s infrastructure projects, mainly at the sectors of economy and social infrastructure. PPP Center is an implementation of Presidential Regulation No 38/2015 on the Partnership between Government and Enterprises in Infrastructure Provision.

Director of Strategic and Debt Portfolio Affairs at Directorate General of Risk and Funding Management (DJPR) Schneider Siahaan said that government is unable to cover all infrastructure projects expenses due to the budget limitation. Hence, to date the government has created various funding schemes, including the scheme of government and private sector partnership, as well as the partnership between government-SOEs and locals ownership enterprises. Aside of the domestic partnerships, the government also seeks funds from donor institutions abroad. “Now, the challenge is selecting which projects are going to be funded by state budget, SOE’s, locals ownership enterprises, and privates”, Schneider said. To date, private sector is quite active involving in some funding schemes for various government infrastructure projects, including toll road and power plant projects.

Some of infrastructure projects are also funded by foreign loans. However, Schneider admitted that the scheme has potential risks of foreign currency fluctuating. If rupiah depreciates, the debt burdens will be higher. The burdens can be covered if the project has large impacts for domestic economy. (Translator: Muhammad Farid)

Editor: Sanny Cicilia