Time for private sector to enjoy niche infrastructure projects
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Investor Daily - Saatnya swasta nikmati ceruk proyek infrastruktur
20 January 2025
By Heru Febrianto
President of Indonesia Prabowo Subianto has affirmed that he will grant the private sector a greater role in infrastructure development, rather than relying solely on assignment to ministries, agencies, or state-owned enterprises (SOEs).
President Prabowo Subianto expressed his confidence that Indonesia can achieve an economic growth target of 8%. This optimism was conveyed during his address at the National Consolidation Meeting of the Indonesian Chamber of Commerce and Industry at The Ritz-Carlton Hotel in Jakarta on Thursday (16/1).
"I have only been leading the government of the Republic of Indonesia for about three months, and the more I study our economic situation, the more confident I feel. I am optimistic, I believe, I am convinced that we will achieve and perhaps even exceed 8% growth," said Prabowo, as quoted by the official Cabinet Secretariat website in Jakarta on Friday (17/1/2025).
To achieve this, President Prabowo reminded that economic management must be carried out efficiently and based on logic and accurate calculations. He emphasised that wastefulness and inefficient practices must be stopped. "No organisation can survive if its expenditure exceeds its income. Therefore, I am determined to lead an efficient government," he asserted.
In his address, President Prabowo also highlighted the importance of the private sector's role in national development, particularly in infrastructure. According to Prabowo, by partnering with the private sector, the government can drive national economic growth together. "Especially in infrastructure, we will hand it over to the private sector for them to play a bigger role. We hope they will be more efficient, timely, innovative, and able to bring growth everywhere," said Prabowo.
The President emphasised that he is not halting infrastructure projects, but rather handing over some projects to the private sector to be more efficient. Going forward, his administration will also change the infrastructure development scheme from assignments to ministries/agencies or SOEs to more involvement of the private sector. "Some say I am stopping infrastructure projects. That is not true, I am not stopping them. I am changing the infrastructure projects, most of which I will hand over to the private sector to build," said the President.
In addition to infrastructure, President Prabowo revealed that the food self-sufficiency and renewable energy programmes are also top priorities for his administration. He is optimistic that these achievements can be realised faster than the target.
"Our targets are becoming clearer, we plan to achieve food self-sufficiency in 4 years, but we will not be surprised if long before 4 years we will already be self-sufficient in food. The same goes for energy self-sufficiency, we will be one of the few countries in the world to have green energy, we will have complete and substantial renewable energy," he explained.
Infrastructure budget withheld
As previously reported, based on the directives of President Prabowo Subianto, Finance Minister Sri Mulyani has withheld the entire infrastructure budget for government development projects.
This was conveyed by Public Works Minister Dody Hanggodo, following a meeting with National Development Planning Minister (PPN)/Bappenas Head Rachmat Pambudy at the end of November 2024. "All infrastructure funds are temporarily withheld by the Finance Minister in accordance with President Prabowo's directives," Dody stated at the time.
As a result of this budget withholding, the government is forced to temporarily halt various large-scale physical development projects. "On several occasions, I have mentioned that large physical developments such as dam construction and others are temporarily stopped," he emphasised.
This step is taken to realise the flagship programmes of Prabowo's administration, namely food, energy, and water self-sufficiency, amid the limited budget available to the state.
"With today's limited budget, we are optimising it to successfully achieve President Prabowo's Asta Cita or eight goals in food, energy, and water security," Dody explained.
The allocation of funds for various infrastructure projects will be withheld until the budget is available to finance the development. Ministers in the Red and White Cabinet have also held meetings to discuss this matter. "The ministers have sat together, chaired by the Bappenas Head. Without the Bappenas Head, we cannot do anything. He will make the plans. After that, the decision is unanimous and clear on the direction," Dody elaborated.
Dody mentioned that National Development Planning Minister/Bappenas Head Rachmat Pambudy has also provided directives regarding this matter. The state budget will be optimised to fund food, energy, and water security programmes.
He stated that infrastructure projects will resume once the state budget is available to finance development. "Until they are needed [or] until the budget is available. [We are] waiting for the availability of the funds [before continuing development]. The most important thing now is the welfare of the people. If the people are prosperous, taxes will automatically increase, and the budget will also increase," he said.
Nevertheless, Dody said that his party is certainly preparing several new funding schemes to finance various infrastructure projects that will proceed. "There will definitely be several. But if we build such large projects, they must be compromised with other targets. Our targets are not only food, water, and energy self-sufficiency. There are other targets that must also be pursued," he explained.
Proper planning required
Separately, urban infrastructure analyst from Universitas Trisakti, Yayat Supriatna, considers President Prabowo Subianto's move to shift infrastructure development from assignments to SOEs, ministries, or agencies to the private sector as a correct step. However, the government must consider the profits gained by the private sector. "Involving the private sector in infrastructure development planning must certainly provide profits. Because the private sector’s concept of investing everywhere is driven by profit and quick return on investment," he told Investor Daily.
Yayat stated that private sector investment in infrastructure must be properly planned and discussed together. So far, Indonesia has had various programmes with the private sector and SOEs. For instance, during President Susilo Bambang Yudhoyono's era, there was the MP3EI or Master Plan for the Acceleration and Expansion of Indonesia's Economic Development. Meanwhile, during President Joko Widodo's era, there was the Public-Private Partnership (PPP) programme through National Strategic Projects (PSN). "But not all of them could run smoothly. They require intensive planning because the names and budgets also change with the new regime. So, they must be evaluated," he explained.
He believes that business players, especially the private sector, will think more carefully about getting involved in government-planned infrastructure projects because infrastructure projects are capital-intensive and risky.
"Because they are capital-intensive, the risks must be guaranteed by the government. Even more so because the return on investment is not quite so fast," he said.
Yayat added that if the government is serious about involving the private sector, then the mindset must also change. On the other hand, the government must ease regulations so that the private sector is willing to participate in various infrastructure developments in the country.
