Government Policies to Support Infrastructure Development in Indonesia

Transcription

1 Government Policies to Support Infrastructure Development in Indonesia Pandu Patriadi I. Introduction 1.1. Background Starting from 2008 fiscal year on State Budget Planning (RAPBN) include fiscal risk statement which the purposes are : (a) Transparency, and (b) Sustainability. Openness transparency needed related government fiscal policy. State budget sustainability needed in order to long term continuity state budget (APBN). In fiscal risk statement disclosure, one of fiscal risk sources identified from government support and guarantee on infrastructure development. Implementation of infrastructure development policy in Indonesia should be clean and clear. Figure - 1 Fiscal Risk Statement in State Budget (APBN) Revenue Increase of Expenditure Increase of State Bugdet Deficit Mi xed Risk Sources : State Budget (APBN 2014) Conti ngent Liabiliti es Increase of Direct Liabilities Macroeconomic Assumption Finance (Government Loan, Financial Sector, Pension Program) Sosial (Fiscal Descentralization, Natural Disaster) Satate Owned Enterprises (SOEs) Government Support and Guarantee on Infrastructure Development Other Government Risk 1

2 1.2. Government Guarantee for Infrastructure Financing Since 2010, Government support and guarantee on infrastructure development based on Presidential Regulation No. 13/ 2010 on Regulate Cooperation Between Government and Infrastructure Institutions. Government Supports is a fiscal and non fiscal contributions of Ministry/ Government Institutions to increase cooperation financial project feasibility. Government Supports are : (a) Fiscal Contribution (stated on state budget and local government budget), and (b) Non Fiscal Contribution : licenses, land facilities, construction development supporting, etc. On the other hand government guarantee is financial compensation and other compensation which is given by Ministry of Finance to Institutions through risk scheme via Cooperation Project. Government Guarantee is given based on management principal and financial risk control in state budget (APBN). Government guarantee in financial compensation is given by Ministry of Finance through infrastructure guarantee institution Private Participation in Infrastructure Financing Government has decided that prime priority infrastructure and private participation needed to fill into financial gap which is not fulfilled by APBN. Because of government function shifting from financier to be guarantor. As a base of a public private partnership (PPP), the government had issued Presidential Regulation No. 13/ 2010 on Regulate Cooperation Between Government and Infrastructure Institutions. Presidential Regulation No. 13/ 2010 state on is public private partnership (PPP) in Infrastructure availability. Infrastructure investment projection needed on 2010 till 2014 is US $ 143 billion or equal with Rp Trillion. Base on that investment needed, Government hopefully to allocate infrastructure spending is US $ 50 billion, there will be funding gap is US $ 93 billion (Rp 850 trillion). That funding gap hope fully financing by private with detail as follows are US $ 52 billion and US $ 41 billion from private sector with scheme public Private Partnership (PPP). Government had issued government guarantee on investor and lender on implementation of infrastructure project. The guarantee are needed because of private sector concern related to Contracting Agencies (CA). 2

3 Figure - 2 Investment Infrastructure Projection : Sources : Bappenas, Indonesian National Plan (RPJMN) : II. Learning From Korea Development Experience as a Benchmarking Indonesia should to learn from Korea experience in infrastructure development policies relate to legal framework development, infrastructure government institutions, infrastructure financing instruments, private participations infrastructure (PPI) schemes, reforms on public private partnership (PPP) system, etc Limited Government Funds and The Needs for Private Participation in Infrastructure (PPI) Financing Infrastructure projects and shortage of the public funds in Korea had to mobilized by : taxation, designated funds, public pension funds, private investment and government bonds. PPP as a good alternative in some areas and way to activate private participation as follows industrial estate, electricity, telecommunication, freight depot, local toll roads, etc. 3

4 Private participation required incentives such as : the public agency, pairing public projects with profitable projects, arranging long term financing from public funds, tax exemptions, tax incentive, etc Legal Framework of PPP In Korea The public private partnership (PPP) act directs Private Infrastructure Investment Management Centre (PIMACT) to issue Annual PPP Plan that provides detailed and practical guidelines for implementing PPP Projects. PIMAC has developed PPP Guidelines to deliver transparency and objectivity in PPP project implementation Emerging Issues in Infrastructure Development PPP policies will support in promoting foreign direct investment (FDI) for infrastructure project : allowed the selling of the operating right of profitable existing infrastructure facilities to relevant foreign firms. Relaxed various restrictions on foreign capital loan and foreign currency from overseas financial institutions when they were used for infrastructure investment. III. Infrastructure Policy Implementations 3.1. Private Participation in Infrastructure Financing Policy Concern of the big investment funding fund needed to government support availability, Ministry of Finance has facilititated as follows : 1. Land Fund, berupa land revolving fund (LRF), as a revolving funds to investor as a guarantee funds to provide land and land capping as a government support on land price increment on tol highway project. 2. Guarante Fund purpose is to increase feasibility infrastructure project and ring fencing for APBN from guarantee risk in PPP scheme. 3. Infrastructure Fund purpose is to infrastructure financing and brigding of short term domestic financing availability. 4

5 3.2. Government Guarantee for Infrastructure Project The facilities had been developed by Ministry of Finance since 2005 relate to infrastructure development as follows PPP scheme : Figure - 3 Infrastructure of Financing Facilities Sources : Ministry of Finance, State Budget Planning (RAPBN) 2014 For sinergy between market needs and government guarantee, government guarantee is given base on private sector needed to involve into infrastructure project in PPP scheme. The Government had issued Presidential Regulation No. 78 / 2010 and Ministy Finance Regulation No 260/ 2010 to minimize private sector concern about cost transaction with government institutions Policy Recommendation for Public Private Partnership (PPP) Government commitment to accelerate infrastructure development through APBN as follows : infrastructure spending (by Ministry/ Government Institutions), infrastructure financing and government support/ guarantee. Government support and guarantee will be cause fiscal risk. So disclosure of the risk is a must. 5

6 Figure - 4 Private Participation in Infrastructure Financing Policy In Order to Government Support and Guarantee, Ministry of Finance Facilitated as Follows : Projection of contingency fund is prepared to anticipate risk factors as base government Contingent Liabilities relate to Government support and guarantee. The main function of contingency fund is APBN ring fencing if default happened. The keypoint of capacity building is a human resources and organization, during the new cabinet october 2014, The Finance Education and training agency (FETA) Ministry of Finance to achieve actually in the real cases as main the new government agenda to support infrastructure development in Indonesia. 6

7 References (2003), Law of RI No. 17/ 2003 on Financial State (2004), Law of RI No. 01/ 2004 on Treasury State (2013), Law of RI No. 23/2013 on State Budget (APBN) Fiscal Year 2014 Presidential Regulation No. 13/ 2010 on Regulate Cooperation Between Government and Infrastructure Institutions Presidential Regulation No. 78/ 2010 on Infrastructure Guarantee in Join Program Project Cooperation Between Government and Infrastructure Guarantee Institutions Ministry of Finance Regulation No. 26/2010 on Guidances of Guarantee Infrastructure Project with PPP Scheme Hull, John C Risk Management and Financial Institutions. Pearson Education Inc. New York Megginson, William L Corporate Finance Theory. International Edition. Addison Wesley. New York 7