BUMNs and Private Sector Encouraged to Build Infrastructure

May 7, 2015, Investor Daily, Page 6, Section: Infrastructure and Transportations

JAKARTA – Ministry of Public Works and People’s Housing (PUPR) has stated it will rely on financing by the private sector and State-Owned Enterprises (BUMNs), in funding infrastructure [development]. This is because the state budget will not be sufficient in financing infrastructure over the next five years.

Minister of PUPR, Basuki Hadimuljono, said that capital from the private sector will be prioritised in each infrastructure project. If private investors are not interested in a project, the government must fund the project using the state budget (APBN). This is in line with the directive of President Joko Widodo (Jokowi).

“There is support from the private sector, then BUMNs. If none of them are interested, APBN will come in. So, there is no influence from [the possible reduction of the state] budget,” said Basuki in Jakarta, recently.

According to Basuki, the role of the private sector and BUMNs is very important in financing infrastructure today. This is especially so this year, amid economic growth that has been predicted to be quite sluggish and this will impact on state revenue. Therefore, there are a number of infrastructure projects that will be designated for BUMNs.

He gave the example of the construction of one million houses, which use funds from a state bank, PT Bank Tabungan Negara Tbk (BTN). The bank has prepared funds as much as Rp 10 trillion to support the programme. “Later BTN will be directed to support the construction of houses by the government,” said Basuki.

In addition, there is the construction project of trans-Sumatera toll road, which relies on the role of PT Hutama Karya through the provision of state equity capital participation. With the additional capital, the construction sector BUMN can undertake project expansion with a much bigger value than the additional capital provided.

Outside the funding from private investors and BUMNs, [the government] keeps open the possibility of getting loan funds from foreign institutions. According to Basuki, this manifests the authority of the Ministry of Finance, including the discourse on the formation of an infrastructure bank.

The infrastructure [funding] requirement that the government has planned for the 2015 – 2019 period is very large. The amount could reach Rp 5.000 trillion to Rp 6.000 trillion. It means, every year some Rp 1.100 trillion to Rp 1.200 trillion is needed.

This year the government has allocated Rp 290 trillion funds for infrastructure development. Ministry of PUPR has got an allocation of Rp 118.5 trillion for 13,773 projects in Revised State Budget (APBN-P) of 2015. Next year, the ministry gets a budget ceiling amount of about Rp 121 trillion.

Indef researcher Ahmad Heri Firdaus said that there is a funding gap of Rp 1,178 trillion from the total capital expenditure investment requirement over the next five years amounting to Rp 5,519 trillion.

“To cover the gap, the government has planned to use the basic assets of 11 BUMNs worth Rp 350 trillion and public private partnership (KPS/PPP) to the amount of Rp 1,183 trillion. Even that amount is still less than 50 percent of the total capital expenditure requirement. There is still a gap of Rp 2,808 trillion,” he said.

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