The way ahead for Indonesia : How to ensure the financing for its infrastructure projects Dr. Robert Pakpahan, Ak Director General of Financing and Risk Management, Ministry of Finance Indonesia
Infrastructure Projects and Financing Schemes Government Budget for Infrastructure Government Guarantee Public Private Partnership Infrastructure Provision
Indonesia Infrastructure Projects and Financing Medium Term Development Plan 2015 2019 3 Infrastructure Projects Financing Breakdown New Roads 2,650 km Highway 1,000 km Road Maintenance 46,770 km Bus Corridors 2 New Sea Ports 24 Sea Port Development 59 Total Financing Needs: Govt & Local Budget (41.3%) ~ US$148.8bn Pioneer Cargo Ships New Airports 15 Airport Infrastructure Development Airplanes 20 Rail lines 2,159 km Intra City Rail Lines 1,099 km Rp4,796.2 tn ~ US$360.6 bn Financing Gap SOE (22.2%) Private through PPP (36.5%) ~ US$80.2bn ~ US$131.7bn USD/IDR exchange rate of 13,300 Alternative Financing Scheme Source: National Development Planning Agency
Infrastructure Financing Schemes 4 SOEs, Private and PPP are Alternative Sources of Funding as Government Budget Could Only Support ~41% of Our Infrastructure Needs Budget Central & Regional Budget (Special Allocation Fund & Rural Transfer) Mainly to support basic infrastructure projects: Food Security: Irrigation, dams etc. Maritime: Seaports, shipyards etc. Connectivity: Village roads, public transportation etc. SOE Government to inject capital into SOEs intention is that through a multiplier effect, more infrastructure projects can be developed Key focus areas: Infrastructure and maritime development Transportation and connectivity Food security Medium term infrastructure developments in focus: Water Supply, Airports, Seaports, Electricity and power plants, Housing, Mining Private through PPP Government support for PPP : Land Fund: Modification and simplification of land acquisition process Project Development Facility (PDF) through PT Sarana Multi Infrastructure Indonesia Infrastructure Guarantee Fund (IIGF) Viability Gap Fund (VGF) Infrastructure Fund & Availability Payment (AP) Projects Ready for Auction under PPP Scheme: Toll roads projects such as Balikpapan-Samarinda, Manado- Bitung Railway projects such as Halim-Soetta Airport Express Railway Water supply such as West Semarang water supply project
Financial facilities to support the acceleration of Infrastructure Development 5 Acceleration of public infrastructure development is partly translated into programs to increase private participation and SOEs involvement in the development of public infrastructure. Ministry of Finance provides a number of financial facilities to attract more private participation as well as to increase the capacity of SOEs in developing public infrastructure. Financial Facilities Capital injection/pmn to SOE through Gov t Budget To increase SOEs leverage in financing infrastructure development, the government also provides additional capital injection (PMN). PPP Projects Project Development Facility (PDF) Viability Gap Fund (VGF) Government Guarantees (provided directly by MoF or through IIGF) Availability Payment scheme (AP) Non-PPP Projects Government guarantees to SOEs loans from IFIs for the Development Infrastructure Projects Business Viability Guarantee Letter for PT. PLN power projects Credit guarantees to SOEs loans for the development of Sumatra Toll Roads, PT. PLN power projects (FTP1), Regional Water Companies (trillion Rp) Infrastructure related SOEs Revised Budget Budget 2016 2017 PT Penjaminan Infrastruktur 1,0 1,0 Indonesia PT Sarana Multigriya Finansial 1,0 1,0 PT Sarana Multi Infrastruktur 4,2 2,0 PT Hutama Karya 2,0 PT Wijaya Karya Tbk. 4,0 PT Perusahaan Listrik Negara 23,6 PT Jasa Marga Tbk. 1,3
Infrastructure Projects and Financing Schemes Government Budget for Infrastructure Government Guarantee Public Private Partnership Infrastructure Provision
Central Gov t Budget on Infrastructure (2016 2017) Compared to R-Budget 2016, budget for infrastructure in 2017 budget has been increasing 7 Social Infrastructure 5,7 4,2 R-Budget 2016 Infrastructure Support (trillion Rp) Economic Infrastructure 2016 5,9 151,2 88 Economic Infrastructure infrastructure that promotes economic activity, such as roads, highways, railroads, airports, sea ports, electricity, telecommunications, etc 62,1 307,1 5,5 4,2 0 100 200 Ministerial Spending Non-Ministerial Spending (incl: VGF fund) Transfer to Region and Village Fund Social Infrastructure infrastructure that accommodates social services, such as schools, universities, hospitals, community housing, etc Financing (Capital Injection/PMN, FLPP) 2017 Budget 2017 336,9 2,7 39,5 133,7 161 Infrastructure Support infrastructure support includes land management, industrial area development, improvement of investment climate, etc 0 100 200 Source: Ministry of Finance Financial Notes of 2017 Budget
Role of Gov t Debt to Finance Projects is significant 8 100 50-15,0 10,0 5,0 0,0 External Loan Disbursements 31 16 55 53 37 35 15 18 18 2012 2013 2014 2015 2016* Program Loan Sukuk Issuance for Project Financing 0,8 1,6 7,1 84 29 55 Project Loan (trillion Rp) 13,7 2013 2014 2015 2016* 73 37 36 Most of debt financing, which is bond issuance, is categorized as general financing to finance budget deficit. However, debt earmarked to specific project in form of Project Loan and Project Financing Sukuk are also growing. Some projects financed by Project Loans as follows: - Jatigede Dam - Jakarta MRT Project - some Electricity Projects. Some projects financed by Project Financing Sukuk as follows: - Cirebon-Kroya double track railway - Improvement of Islamic Universities - National Roads and Bridges * Revised Budget
Infrastructure Projects and Financing Schemes Government Budget for Infrastructure Government Guarantee Public Private Partnership Infrastructure Provision
Government Guarantees Program (2008 present) 10 Type Credit Guarantee Business Viability Guarantee PPP Guarantee Sector Power (Electricity) Water Infrastructure Toll road Power (Electricity) Infrastructure Perpres 91/2007 and PMK 44/2008 Coal Power Plant 10.000MW Fast Track Program (FTP 1) Full credit guarantee Guarantee for PLN s default on its payment obligation Perpres 29/2009 and PMK 229/2009 Clean Water Supply Program 70% of Guarantee Guarantee for PDAM s default on its payment obligation Perpres 82/2015 and PMK 189/2015 Direct Lending from International Financial Institution to SOEs Full credit guarantee Guarantee for SOE s default on its payment obligation Perpres 117/2015 jo. Perpres 100/2014 and PMK 253/2015 Sumatera Toll Road Development Full credit guarantee Guarantee for Hutama Karya s default on its payment obligation Perpres 48/2011 and PMK 173/2014 Renewable energy, Coal and Gas Power Plant 10.000MW Fast Track Program (FTP 2) Guarantee on the viability of PLN to fulfill its obligation in Purchase Contract of Electricity with Private Developer and guarantee against political risk Perpres 78/2010, Perpres Public-Private Partnerships Project (PPP)/ KPBU/ 38/2015 and PMK 260/2010 KPS Guarantee on the obligation of Ministry/Agency, Local Government, SOEs/Local SOEs to an entity in accordance to the Agreement Source: Ministry of Finance
Management of Government Guarantee in Indonesia 11 Maximum Guarantee Limit Maximum Guarantee Limit defines the maximum amount of new guaraantees allowed to be issued during a certain period. Taking into account current combined portfolio of government debt and guarantees, Maximum Guarantee Limit for the period of 2014 2017 is set at 2,57% of GDP. The guarantee limit can be reviewed and adjusted from time to time Reporting Contingent Liabilities is stated as one of fiscal risk sources in Financial Notes of National Budget (APBN) FY 2016. DG of Budget Financing and Risk Management regularly issues publication of Central Government Debt Profile, in which information regarding government guarantee also included in Part 7 of the publication. Role of IIGF as Ring Fencing IIGF serves as Government s single window for appraisal and processing/structuring of guarantees. IIGF is established to satisfy the following objectives: a. To provide a political risk guarantee for PPP Infrastructure Projects. b. To improve creditworthiness and quality of PPP infrastructure projects by providing a credible guarantee on political risk. c. To improve the governance and transparency of guarantee provisions. d. To protect Government contingent liability vis-à-vis guarantees (ring-fencing the contingent liability exposure of the State Budget).
Budget Allocation for Government Guarantee 12 Budget Allocation for Claims on Government Guarantee (billion Rp) 1500,0 1000,0 500,0 0,0 2010 2011 2012 2013 2014 2015 2016 (Revised budget) 2017 (Budget) Total 1050,0 904,0 633,3 706,0 964,1 843,5 651,7 721,1 Sumatera Toll Road 39,4 Direct lending 21,1 PPP Guarantee 59,8 48,2 49,7 80,6 209,9 Clean Water Program 50,0 15,0 10,0 35,0 2,2 1,8 0,6 1,1 FTP 1 1000,0 889,0 623,3 611,2 913,7 792,0 570,5 449,7 Since 2013, budget allocation for claims on government guarantee that are unrealized until the 3 rd quarter will be accumulated in the government guarantee reserve account. The government guarantee reserve account balance as of Sept 2016 is Rp1,670,1billion. It is resulted from 2013 and 2014 budget, while 2015 allocation was not accumulated due to fiscal need. Source: Ministry of Finance
Government Guarantee Portfolio guarantees are carefully provided to meet various item of infrastructure programs 13 Until Sept 2016, total guarantee committed are equal USD16,2 billion ( IDR211,1 trillion) for 6 th programs, and outstanding/exposure were equal USD5,8 billion (IDR75,2 trillion) USD/IDR exchange rate of 13,000 Guarantee Portfolios based on Guarantee Classification As of September 2016 Program Guaranteed Party Schemes No. of Letters Currency Value (bn) Outstanding (bn) A Credit Guarantee 50 US$ 5.1 2.6 IDR 37,724.8 15,602.5 Acceleration of coal-fired 11 US$ 4.0 2.5 1. power plant project (10,000 PLN Non-PPP MW) stage 1 25 IDR 35,678.7 15,422.3 Acceleration of drinking water 2. supply project PDAM Non-PPP 10 IDR 324.8 180.2 Direct Lending from 3. International Institutions PLN Non-PPP 2 US$ 1.1 0.12 Acceleration of toll road in 4. Sumatera Hutama Karya Non-PPP 2 IDR 1,721.3 - B Investment Guarantee 11 US$ 8.3 1.95 IDR Acceleration of coal-fired 5. power plant project (10,000 IPP Non-PPP 10 US$ 5.1 1.25 MW) stage 2 Government partnership with 6. Enterprise Infrastructure Private PPP 1 US$ 3.2 0.7 Guarantee Agency Total 61 US$ 13.3 4.6 IDR 37,724.8 15,602.5 Source: Ministry of Finance Outstanding for acceleration of toll road construction in Sumatera is zero since the loan has not been disbursed yet by PT Hutama Karya.
Government Guarantee Plan 14 One of the new facilities is the guarantee on Direct Lending of SOEs to International Financial Institutions for the development of infrastructure projects. So far, this type of guarantee has been provided as follow: No. Project Name 1. Sumatera Power Transmission and Distribution Project cost (IDR mn.) 2. Sumatera Power Distribution 500 World Bank 3. The Enhancement of Electricity Grid Lender SOE Status 600 ADB PT. PLN Guarantee is effective PT. PLN Guarantee is issued, not yet effective 330 IDB PT. PLN Proposal has been submitted 1 Other Potential Government Guarantee Plans 35.000 MW Fast Track Program 1. Credit Guarantee 2. Business Viability Guarantee Perpres 4/2016 The government has also issued guarantees to loans of PT. Hutama Karya in the development of Sumatra Toll Road, which comprise as follow: No. Section Project cost (IDR bn.) Status 1. Medan Binjai (17 km) 1,604 Financial close 2. Palembang - Indralaya (22 km) 3,301 Financial close 3. Bakauheni Terbanggi Besar (140 km) 16,795 Finding financing 4. Pekanbaru Dumai (131 km) 16,210 Finding financing 5. Terbanggi Besar Pematang Panggang (100 km) 11,871 Pre-FS updating 6. Pematang Panggang Kayu Agung (85 km) 10,121 Pre-FS updating 7. MINISTRY Kisaran Tebing OF FINANCE Tinggi (60 km) 6,991 Pre-FS updating 8. AND Palembang RISK MANAGEMENT Tanjung Api-api (90 km) 14,289 Pre-FS updating 2 National Strategic Project Political Risk Guarantee Perpres 3/2016
Infrastructure Projects and Financing Schemes Government Budget for Infrastructure Government Guarantee Public Private Partnership Infrastructure Provision
PPP scheme 16 PPP scheme and facilities provided by MoF to PPP Projects Project Development Facility (PDF)
Establishment of PPP Unit 17 Broad Objective Core Mandates Champion project preparation and acceleration of the PPP agenda in Indonesia Improve quality of project selection under KKPPI OBC criteria Support project preparation through PDF support and use a high quality Transaction Advisor Act on behalf the Minister of Finance in providing government support approvals for projects Additional Mandates Coordinate all public finance instruments Provide input for PPP Policy Development and Regulations Implement capacity building program to GCA One stop shop for PPP promotion & Information
PPP Projects With new PPP unit in the Ministry of Finance and some facilities are already in place, some PPP projects already reached the stage of financial close while more projects are expected to reach that stage in the next few months 18 No. Project Name Project cost (IDR) Financial Facility from MoF 1. Central Java Power Plant Project 40 T Guarantee (MoF and IIGF) Financial close on 6 June 2016 2. Umbulan Water Project 2.1 T PDF, VGF and IIGF Guarantee PPP agreement signed on 21 July 2016 3. Bandar Lampung Water Project 900 B PDF, VGF and IIGF Guarantee Feasibility study in progress 4. Palapa Ring Project West Package 1.28 T IIGF Guarantee and AP Financial Close on 11 August 2016 5. Palapa Ring Project Central Package 1.38 T IIGF Guarantee and AP Financial Close on 29 September 2016 6. Palapa Ring Project East Package 5.13 T IIGF Guarantee and AP PPP & guarantee contracts signed on 29 September 2016 7. Minemouth Coal Power Project 9 & 10 80 T Co-guarantee (MoF and IIGF) Bid submission delayed 8. Batang Semarang Toll Road Project 11 T IIGF Guarantee PPP & guarantee contracts signed on 27 April 2016 9. Manado Bitung Toll Road Project 5.1 T IIGF Guarantee PPP & guarantee contracts signed on 8 June 2016 10. Balikpapan Samarinda Toll Road Project 9.9 T IIGF Guarantee PPP & guarantee contracts signed on 8 June 2016 11. Pandaan Malang Toll Road Project 5.9 T IIGF Guarantee PPP & guarantee contracts signed on 8 June 2016 12. Serpong Balaraja Toll Road Project 6 T - PPP contracts signed on 8 June 2016 13. Pirngadi Regional Hospital Project 546 B PDF and AP Market sounding preparation 14. Bontang Oil Refinery 120 T PDF OBC development 15. Jakarta-Cikampek Toll Road Project 16.4 T Co guarantee (IIGF and MoF) PPP Agreement has been signed on 5 Dec 2016 16. Krian-Legundi-Manyar Toll Road Project 9.12 T Co guarantee (IIGF and MoF) PPP Agreement has been signed on 5 Dec 2016 17. Cileunyi-Sumedang-Dawuan Toll Road Project 5.7 T Co guarantee (IIGF and MoF) In-principal co-guarantee approval letter has signed by Ministry of Finance on 19 September 2016 Status PDF : Project Development Facility IIGF : Indonesia Infrastructure Guarantee Fund VGF : Viability Gap Fund AP : Availability Payment
Infrastructure Projects and Financing Schemes Government Budget for Infrastructure Government Guarantee Public Private Partnership Infrastructure Provision
Policy Updates on Infrastructure Financing 20 1 PPP Projects: MoF regulation on the Availability Payment Scheme has been issued PMK 190/PMK.08/2015 A new ammendment of MoF regulation on the provision of infrastructure guarantees has been issued PMK 8/PMK.08/2016 A new ammendment of MoF regulation on the provision of project development facility has been issued PMK 129/PMK.08/2016 2 On Government guarantees of direct lending Presidential regulaton and MoF regulation for the legal basis of Guarantees to SOE Direct Lending have been issued 3 On the implementation of Presidential regulation number 3/2016 on National Strategic Projects and Presidential Regulation number 4/2016 on Power Infrastructure Projects An MoF regulation on the government guarantee provision to support both Presidential Regulations is currently being drafted.
Efforts to Accelerate Infrastructure Provision 21 Improvement on PPP Regulation By taking into account the growth of PPP project potential, the Government of Indonesia has revised the Presidential Regulation No. 67 of 2005 on PPP and its amendments by issuing the new Presidential Regulation No. 38 of 2015 on PPP on 20 March 2015. This new Presidential Regulation addresses the constraints which contributes to delays in PPP implementation, such as: PPP for the social infrastructure; a low quality of pre-feasibility studies; gaps of quality in assets that were partly constructed by the Government; unattractive investment return scheme; and weak Ministries/Institutions commitment for PPP projects. The Ministry of National Development Planning has issued the Ministerial Regulation No. 4 of 2015 on the implementation Procedures for a Public-Private Partnership in Infrastructure Provision. This Ministerial Regulation is a derivative regulation to supplement the Presidential Regulation No. 38 of 2015 on PPP. Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)
Efforts to Accelerate Infrastructure Provision (continued) 22 Regulation improvement to accelerate land procurement process The Government of Indonesia issued Law No. 2 of 2012 on Land Acquisition for Public Interest, with a purpose to provide certainty about the land acquisition duration for the Government Contracting Agencies and the Investors. The Law sets an estimated 583 days maximum time to complete the land acquisition process. For its implementation, the Law No. 2 of 2012 was supported by the Presidential Regulation No. 71 of 2012 on Land Acquisition Implementation for Developing Public Facilities, which has been revised into the Presidential Regulation No. 30 of 2015. The Amendment to the Regulation allows a Business Entity to allocate funding for a land acquisition which can be reimbursed by the Government following the completion of land acquisition process. With this Regulation, the land acquisition process is expected not to be delayed by the unallocated budget or the delay on the budget disbursement. Land Procurement Process as Stipulated in Law No. 2 of 2012 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)
Significant Progress on Key Infrastructure Projects 23 Roads Dams Housing Trans-Sumatra Highway Cikampek-Palimanan Highway (Operational) Jatigede Dam (Operational) Raja Ampat Housing Project, Papua Transportation Jakarta MRT Project Terminal 3 Ultimate Soekarno-Hatta 1 New Tanjung Priok Port Project 1 Komodo Airport, NTT Matahora Airport, Southeast Sulawesi Tual Airport, Maluku Juwata Airport, Tarakan 1 Not funded from National Budget
Significant Progress on PPP Infrastructure Projects 24 Energy (CJPP Project) Communication and Informatics (Palapa Ring Project-West Package) BMH : Beach Mainhole NOC : Landing Station
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