Monday, December 3, 2012
Indonesian Government to Offer $6.1B in Infrastructure Projects in 2013
Source: Jakarta Globe
Indonesia is ready to offer 14 major infrastructure projects valued at $6.1 billion to the private sector next year, as part of an effort to boost economic growth.
“These projects have a comparative advantage,” said Dedy Supriadi Priatna, deputy for infrastructure development at the National Development Planning Agency (Bappenas), told reporters on Friday. “Its feasibility study, bidding documents and lands are already available.”
The projects — which are offered through public-private partnership scheme, or a cooperation between the government and the private sector — are scheduled to be tendered in mid-2013.
The projects include a $1.56 billion coal-fired power plant that will feature two 600 megawatt generators in coal-rich South Sumatra province; a $780 million mine-mouth coal-fired plant generating 600 MW, also in South Sumatra; and a $1.33 billion municipal water supply in the West Semarang Municipal Water Supply.
There will also be a $870 million project to revitalize the Malioboro rail station in Yogyakarta; a $435 million monorail in Makassar; a $287 million water supply station in southern Bali; a $200 million water-sawage treatment plant in Jakarta; and a $189 million water supply facility that will serve Jakarta and the outer city Bekasi.
Other projects include a $177 million Jakarta Integrated Urban Transport Club, a $100 million solid waste management facility in Batam, an island in Riau.
Smaller projects include a $78 million hydro-power plant in Karama in South Sulawesi; a $30 million municipal water supply station in Palu, a chartered city on the Indonesian island of Sulawesi; and a $17 million water supply facility in Lamongan.
Dedy said that for this year the government has tendered 17 PPP projects valued at $10.63 billion, and those are now entering the construction phase.
The 17 projects already under construction include a $3 billion power plant in Central Java; a $1.5 billion railway stretching 185 kilometers that connect coal mines and plantations at Bangkuang to ports at Puruk Cahu in Umbulan, East Java; and a $204 million water supply station in Umbulan, East Java.
Additionally, a $196 million toll road will connect Benoa Harbor, Ngurah Rai International Airport and the Nusa Dua tourist area and a water supply in Maros, a district in South Sulawesi.
Armida Alisjahbana, the head of Bappenas, said that the agency is making efforts to help the private sector obtain financing for the projects.
The government is now studying the sale bonds with underlying assets in infrastructure projects, which would be known as infrastructure bonds.
“We proposed to the Finance Ministry the sale of infrastructure-backed bonds. This is one of the ways that can effectively speed up infrastructure projects being worked via the PPP scheme,” she said.
Indonesia, currently the world’s 16th-largest economy, with gross domestic product at $846 billion last year, needs to speed up revitalization of its ailing infrastructure to support growing demand among its rising middle class as well as the higher need for “interconnectivity” among its regions.
The nation has more than 17,000 islands. Even on some of its big islands, infrastructure such as ports, airports and railways are still underdeveloped, creating high costs for businesses to transport goods.
Investors find it difficult to build factories in remote areas, a problem that has been hampering development of natural resource-processing facilities in the country. That’s apart from other traditional hurdles, such as a complicated bureaucracy, corruption and lack of incentives from the government.
Despite all this, global consultant McKinsey & Company said that Indonesia may add 90 million people to its “consuming class” by 2030, the most after China and India. Energy demand may triple from current levels, while convenience stores will lead to a “revolution” in retail. These all will require better infrastructure for better distribution of goods and services.
Indonesia’s economy will rise to $1.8 billion by 2030, McKinsey said in September, which would surpass Germany and Britain to be the world’s seventh-largest economy.
More than a decade after the Asian financial crisis forced the nation to seek an International Monetary Fund bailout, Fitch Ratings and Moody’s Investors Service in the past 12 months raised Indonesia to investment grade. Indonesia, which has the biggest economy in Southeast Asia, has a population of 240 million people. Its growth is among the fastest in the Group of 20 nations.
Armida said the planned infrastructure projects will affect the nation by adding workers and stimulating the economy in regions where the projects are taking place.
The minister, who was an economics professor at Padjajaran University in Bandung, said infrastructure development is vital for the country to achieve more than 6 percent economic growth. The economy last year expanded 6.5 percent, the fastest pace since 1996.