Transportation sector needs innovative financing
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 - Sektor transportasi butuh inovasi pendanaan kreatif
21 October 2024
By Ichsan Amin
Jakarta, ID – The development of transportation infrastructure during the administration of President Prabowo Subianto and Vice President Gibran Rakabuming Raka still requires significant effort and innovation. One key area is the utilisation of funding sources beyond the state budget.
In his first speech as the 8th President of Indonesia, Prabowo Subianto stated that he would prioritise food and energy self-sufficiency challenges over the next five years. Although he did not specifically address the continuation of connectivity infrastructure development, many believe that the new government will maintain its focus on infrastructure projects.
Former Transportation Minister Budi Karya Sumadi remarked that the new government would adopt a more innovative approach to developing the transportation infrastructure sector, building on the achievements of Joko Widodo's (Jokowi) administration over the past decade.
"I believe the Prabowo-Gibran administration will be more innovative. This means that what has been built in the transportation sector over the past ten years only needs further development. I think these developments have not been fully utilised yet," Budi Karya remarked during the release of his biography at Gramedia in Jakarta on Saturday (19/10/2024).
According to him, the development and management of the transportation sector still require significant effort. One of the challenges is to create modern transportation solutions despite the constraints of a limited state budget (APBN).
"The challenge lies in securing budget and funding sources outside the APBN. I believe we have developed various creative funding schemes, involving not only state-owned enterprises (SOEs), but also the private sector and foreign investors," he stated.
The former 2016-2024 Transportation Minister believes that transportation infrastructure development fundamentally aims to connect all regions, with a focus on enhancing efficiency for users, including passengers and cargo owners in the logistics sector.
Therefore, the Ministry of Transportation continues to promote creative funding with SOEs through various mechanisms such as government sharia securities, public service entities, pure investments, and other financing schemes.
“I believe there are many other attractive financing schemes available for the private sector. We just need to consider the requirements and regulations beyond the purview of the
Ministry of Transportation. This approach can help ensure continued infrastructure development,” he revealed.
Meanwhile, Yusuf Randy Manilet, an economic observer from the Centre of Reform on Economic (CORE), explained that creative funding from the private sector and other investors was still necessary due to the limited APBN. However, project certainty needs to be provided not only by the central government but also by regional governments.
“In addition, there are numerous other funding sources that can be utilised by involving multiple parties, including regional governments. These can take the form of concessions from the central government or share distribution schemes with regional governments,” he revealed to Investor Daily.
He believes that these schemes are attractive as long as they can provide a long-term guarantee. "A long-term guarantee means business certainty. This implies that there will be no future regulations that could hinder the investment," he revealed.
Yusuf added that the transportation sector, particularly the logistics sector, attracted many investors. "I believe this sector remains appealing. However, the challenge lies in how all future government stakeholders can coordinate to provide non-capital incentives to encourage private sector investment," he noted.
Industry players demand to be involved
On the other hand, businesses in the transportation sector have high hopes that the new Prabowo-Gibran administration will strengthen collaborations for future advancements.
Carmelita Hartoto, Chairperson of the Indonesian National Shipowners’ Association (INSA), stated that the shipping business sector hopes that existing policies will continue.
Additionally, she expects that policies which are currently suboptimal will be improved.
“We at INSA hope that shipping businesses will continue to be involved in every policy arrangement. This is crucial to ensure that input from the private sector is heard and implemented whenever new regulations are introduced. The shipping sector is closely tied to regulatory frameworks, so national regulations must also align with international standards,” Carmelita stated.
Carmelita emphasised that, in addition to business involvement, it is important to maintain economic stability amid global uncertainty. The escalating global situation significantly impacts not only the economy but also the distribution of goods through shipping and affects cargo owners.
“I believe the government must consider how the private sector can survive during critical situations. If urgent matters arise, we in the private sector hope to be supported by facilities in the fiscal sector,” she emphasised.
She added that favourable financing support is also crucial in this sector, particularly in terms of ship financing schemes that offer competitive interest rates, extended tenures, and adherence to the cabotage principle. "To realise these expectations, the government cannot act alone. Business players and the shipping industry must be included. In fact, all transportation sectors must be embraced to find common solutions," she noted.
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