PPP CENTRAL UNIT: GLOBAL NETWORK III ASTANA ECONOMIC FORUM, Astana, 1-2 July 2010 By Bastary Pandji Indra Director for Public-Private Partnership Development National Development Planning Agency (BAPPENAS) - Indonesia

Indonesia Robust Macroeconomic Outlook Economy grew 4.4% in 2009 compared to 6.1% in Government target average annual growth at 7% during ; Target predicated especially in infrastructure sector as it is a key element in Indonesia’s medium term development plan ; 7% growth target requires about US$ 1.1 trillion of investments during , meanwhile Government budget can only cover 20-30% of total investment; Standard & Poor’s raised Indonesia’s sovereign credit rating to BB from BB- on 12 March 2010, with a positive outlook. S&P and Moody’s Investors Service both rank Indonesia two levels below investment grade, while Fitch Ratings on 25 January 2010 raised its rating to one step below investment. 2

Indonesia Institutional Framework in PPP Implementation to Generate “Bankable” Projects BAPPENAS MOF/RMU Government Contracting Agency (GCA) P3CU PPP node IIGF PDF Consultants Private Investors Financier CMEADonor Unsolicited ProjectsMarket Sounding Preliminary financial structuring Technical consultants by sector PPP consultants Policy improvement and coordiantion support Foreign loan for portion of infrastructure Grant for study Backstop fund Budgeting for government support; e.g. land, vertical split, horizontal split, Guarantee commitment (*4) Direct support commitment (*3) Recourse commitment(*5) Multi- stakeholder alignment GCA commitment(*2) Priority commitment(*1) *1: Support for budgeting, preferencial PDF fee *2: GCA’s responsibilities such as land procurement, licensing *3: Tax incentives, funding for public portion *4: Compulsory guarantee menu defined by sector plus add-on guarantee negotiated by project *5: GCA’s share of risk such as regulatory risk 3 PROJECT POOL CMEA: Coordinating Ministry of Economic Affairs

PPP Center Unit PPP Challenges in Indonesia: Institution 4 One Stop Window Management PPP development authority is spread into many institutions, moreover P3CU is not yet officially established. PPP needs a “champion” in streamlining PPP Process (Project identification, preparation, transaction, land acquisition and government support). Thus, P3CU needs to be equipped with more power/authority. Apply single window management. Land Agency GCA Infrastructure Fund Guarantee Fund Sectoral Department MoF/RMU CMEA Bappenas Local Government Power/Authority Incremental and Small Scale PPP Project Decentralized PPP Implementation PPP Nodes establishment and strengthening Multi Institutions Champion Regional Approach Project Bundling Leads to

PPP Challenges in Indonesia: Fund Projected total investment in the next 5 years: US$ 47, Million (100 Projects) requires US$ 946 Million, while available PDF Fund is US$ 38 Million (0.04% of the needs). Projected total investment in the next 5 years: US$ 47, Million (100 Projects) requires US$ 946 Million, while available PDF Fund is US$ 38 Million (0.04% of the needs). PDF Revolving Fund Establishment of a Land Fund for PPP projects Lack of Fund to support PPP projects Land provision Government Guarantee Government Support World/Regional Infrastructure Fund Project Development Facility Association of World PPP Center Pool of Fund Other Donors 5

PPP Challenges in Indonesia: Capacity Building Lack of coordination Good governance in PPP process Public Institution Private High Standard in securing investment Profit Oriented Provision of design, construction, financing, operation, and management Public Service Oriented ISSUES Insufficient institutional capacity Incremental and Small Scale PPP Project Decentralized PPP implementation Improve Private and Public communication Standardized/acceptable PPP process for both public and private party Regulation and Policy setting Project Preparation Regulation and Policy setting Project Preparation Establishing a common understanding of “Bankable” Project Association of World PPP Center Knowledge and Information Center Regular Investment Forum 6

Jakarta Declaration 2010: Consideration for Association of World PPP Center Establishment Lack of capacity to develop PPPs is a regional phenomenon. Jakarta Declaration was signed on 17 April 2010 at the Asia- Pacific Ministerial Conference;  Calls for greater regional cooperation, especially in capacity building and infrastructure financing. Jakarta Declaration is being converted into a resolution for ratification by the United Nations;  Recommending The UN to take the lead to develop the means for regional cooperation through a Task Force. However, the Asia-Pacific region needs to work with the Task Force to develop a system of mutual self help;  Cooperation could cover a knowledge-exchange program, technical support between member countries, and a regional infrastructure fund. 7

Concluding Remarks  Government of Indonesia (GoI) are welcoming international cooperation in supporting PPP development. We do think Association of World PPP Center will greatly helpful in enhancing each member capacity and accelerating lesson learned, whilst broaden PPP market in the region as well as attractiveness to global financiers.  A proper scheme of world/regional cooperation between PPP Center should help the members in overcoming barriers in PPP development and not to increase the cost of PPP project development/transaction.  Proposed area of cooperation:  Development of financial cooperation for project development facility and infrastructure fund;  Integrated information system;  Knowledge sharing and technical support exchange;  Building best practices as well as consensus among countries in providing fair respective government supports and assessment of fiscal risk.  We do need to assure that any PPP Projects adopt good governance principles. Association of World PPP Center shall play the role encouraging the implementation of this principle whilst still respecting each member authority. 8

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