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As a regulator and facilitator for Indonesia infrastructure projects, the Government has invited participation by the private sector through Public Private Partnership (“PPP”) arrangements. Public Private Partnerships are generally characterized by a private sector entity raising finance to construct an asset required by Government, and providing a facility or service in return for a contractual revenue stream from Government or users.
Regulatory and policy reform has gradually been put in place to create a more conducive environment for private sector participation, including:
These measures are supported by a number of public finance institutions such as the Indonesia Infrastructure Guarantee Fund, Indonesia Infrastructure Finance Company (PT SMI), and PT Indonesia Infrastructure Finance.
PPPs are complex to structure and implement (see Figure 1), but provide a number of opportunities for private sector companies to participate:
The figure below illustrates this structure.
Figure 1: Typical PPP Structure
Pursuing PPP projects requires a significant investment of time and money. It follows that careful project selection is key to success. The needs of public sector entities are also different from those of the private sector and the process for each can vary greatly.
Understanding these disparities is vital to tailoring an approach to meet the needs of the public or private entities. Investors in particular need to consider:
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