Prabowo Subianto and Sandiaga Uno, president and vice-president candidate pair with campaign number 02, promised to implement infrastructure development without using debt financing if they win in the 2019 Presidential Election. This debt-free infrastructure development is actually not a new idea because the current government has done it.
According to Sandiaga, infrastructure development without burdening the state budget and state debt is very possible by involving the private sector. He said he will use a scheme different from the one currently implemented by the Joko Widodo-Jusuf Kalla’s administration.
For basic infrastructure, Sandiaga offers availability payment (AP) scheme, which is considered far cheaper and competitive for the private sector. With this scheme, the private sector will be asked to build the whole construction of the infrastructure project. After it operates, the government will pay the cost of construction in instalments.
Other infrastructure projects will use public-private partnership (PPP) scheme. Sandiaga admitted that the current government has implemented this scheme. However, the participation of the private sector is still low because it has not been implemented optimally, even though he believes the private sector wants to be involved in various government infrastructure projects. “The private sector wants to participate in building infrastructure and this will not burden the state debt,” Sandiaga said.
Sandiaga’s idea seems new, but it is actually not. The current government has used the scheme on a number of infrastructure projects. Presidential Regulation No. 38/2015 as its legal basis has also been issued. This regulation allows the government and business entities to share risks in infrastructure investment.
The Minister of Finance Sri Mulyani said the Joko ‘Jokowi’ Widodo’s administration has involved the private sector in some infrastructure construction. “We have also done a number of things,” she said after the event of information dissemination on regional transfers and village fund for the 2019 Budget Year at the Ministry of Finance, Central Jakarta, Monday (12/10).
Based on the PPP Knowledge Lab data, infrastructure development involving the private sector in Indonesia from 1990 to the first half of this year was the highest among Southeast Asian countries. The investment value almost reached US$ 60 billion, topping the Philippines and Malaysia.
Infrastructure development over the past four years has involved the private sector in several schemes, such as the government-to-business cooperation (KPBU), non-state budget infrastructure funding (PINA), and equity financing scheme by securitizing infrastructure assets that have operated through the capital market. Private investors who are interested can buy and use their funds for the construction of new infrastructure. “Securitization is not debt or financing with debt. It is also not a completely new thing, but it has been done,” he said.
He admitted these funding schemes must still be addressed. Input from the private sector needs to be heard so that they want to be involved in infrastructure projects. The government has received some input from the private sector, including projects that have been guaranteed by the government. PT Penjamin Infrastruktur Indonesia is the special institution providing guarantees under the supervision of the Finance Ministry.
Another scheme is the availability payment. With this scheme, the private sector builds infrastructure using its own funds. After the infrastructure operates, the government will pay in instalments. There is also a viability gap funding (VGF) scheme to increase the financial viability of an infrastructure project. The government has offered these schemes for several infrastructure projects.
In essence, the government has prepared many debt-free infrastructure financing mechanisms. The Economic Coordinating Minister Darmin Nasution said the portion of infrastructure funding through private investment is getting bigger. “Looking at national strategic projects, the APBN may only be 10-11 percent. About 36 percent from state and regional-owned enterprises and 51 percent from the private sector,” he said.