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“ INFRASTRUCTURE DEVELOPMENT ROADMAP AND PROGRESS IN INDONESIA ”

“ INFRASTRUCTURE DEVELOPMENT ROADMAP AND PROGRESS IN INDONESIA ”. Dedy Supriadi Priatna, Ph.D Deputy Minister of Infrastructure Affairs Ministry of National Development Planning / Bappenas. Infrastructure Challenges Mid Term National Development Plan 2010-2014

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“ INFRASTRUCTURE DEVELOPMENT ROADMAP AND PROGRESS IN INDONESIA ”

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  1. “INFRASTRUCTURE DEVELOPMENT ROADMAP AND PROGRESS IN INDONESIA” Dedy Supriadi Priatna, Ph.D Deputy Minister of Infrastructure Affairs Ministry of National Development Planning / Bappenas

  2. Infrastructure Challenges • Mid Term National Development Plan 2010-2014 • Central Government Financing • Rupiah • External Loan/ Grant • Government Guarantee • Public Private Partnership • Summary outline

  3. INFRASTRUCTURE CHALLENGES

  4. Signal from Asian Economic Growth and Emerging Market becoming at Q3 … Economic Growth 4

  5. 8.0 Private 6.0 Govt 4.0 2.0 0.0 Indonesia Albania Russia Cambodia Kazakhstan Source: World Bank THE PERCENTAGE OF INFRASTRUCTURE FINANCING AND GROSS DOMESTIC PRODUCT Infrastructure Financing of other countries (%from GDP)

  6. Indonesia Infrastructure financing chalLEngeS • Actual investments are less than half of the annual requirements to achieve target growth and poverty reduction; So, a continued push for the development of infrastructure is expected for rapid growth and poverty reduction; • Budget for infrastructure only 1 % of GDP , meanwhile requirement about 5 %. • Insufficient budget allocation in infrastructure at all levels of government. Fiscal space does not allow all infrastructure needs to be funded by the public sector; From total national budget, 20 % for education sector, repayment of foreign loan 9,8 %, subsidy 16 %, transfer to local goverment 30 %. Thus, the potencial for infrastructure not more than 25 % from national budget or 5% from GDP. • Deteriorating quality and shortages of infrastructure are major impediments to growth and recovery; • Quality infrastructure services are necessary to sustain growth and maintain or improve competitiveness. And inadequate infrastructure services mean a lower quality of life; • However, the huge investment needs in infrastructure during the next five years and beyond, clearly confront us with enormous challenges. Note: Infrastructure: Transport, Power / Energy, Housing, Telecommunication, Water Resources.

  7. Competitiveness Rating of Indonesia Difficult challenges to promote foreign and domestic investment National competitiveness is low Based on World Economic Forum (WEF), Indonesia ranked 55th out of 134 countries. Meanwhile, Malaysia and Thailand ranked 21st and 34th, respectively. Note: In 2003 cover 101 countries, 2004 cover 104countries, & 2005 cover 117 countries, 2007 cover 131 countries, 2008 cover 134countries Source: World Economic Forum

  8. Indonesia’s infrastructure competitiveness 2008

  9. Competitiveness Rating of Indonesia Based on : World Competitiveness Report, 2009 Growth Competitiveness Index/GCI Ranked 2009, (out of 134 countries) In 1996, Competitiveness Rating of Indonesia better than China, Thailand, Taiwan, dan Srilanka. This fact indicate that Indonesia Infrastructure development is slowing down Sumber: World Competitiveness Report, 2009 – 2010

  10. Water Resources Competitiveness

  11. Housing Problems: Limited access to land acquisition and legality for low income community Limited public access to housing financing Low efficiency level in housing dev’t. Non-optimal utilization of housing and settlement resources Strategy: Subsidy for Housing Credit for ‘Rumah Sederhana Sehat‘ (RSS) is 685,000 units until 2014. Housing Housing Backlog (in thousand units) The accumulated backlog is expected to continue to occur due to growth of 710,000 new households per year • Outstanding Ratio for housing credit to GDP • USA (47%) • Malaysia (27 %) • Indonesia (1,8%)

  12. Slow growth of improved drinking water coverage, especially piped drinking water  from 18.91% to 47.63% (1994-2009) • Supply capacity growth can not keep up with population growth Drinking Water Susenas, BPS, various years

  13. SANITATION • Impact of Poor Sanitation: • 75 % river polluted • 70 % ground water polluted • 150 thousand peoples died annually by diarrhea • For every increment of 1 mg/liter of BOD in river  25% of increase in PDAM cost production from national average tariff • Economic loss related to poor sanitation estimated about US$ 6,3 billion annually (2.3% of GDP) • Government investment is IDR 200/capita/year. If the investment for sanitation infrastructure is around IDR 47,000/capita/year  • Increase in community productive time : 34%-79% • Decrease in health cost : 6%-19% • Decrease in medical cost : 2%-5%

  14. Solid Waste Persentage of Collected Solid Waste • Only 20.63% solid waste collected, the remainder is burnt, burried, disposed to rivers, and anywhere • Only 2% of existing Final Disposal Site using sanitary landfill method • Improper solid waste management contributes to global warming  climate change • Other impacts : flood, environmental pollution, public health Cities in Indonesia produce solid waste 10 million ton/year 10 million ton of solid waste produce 404 million m3 of metan annually

  15. Electricity National Target 75/100: Year 2020 (75 years after indipendent day)electrification ratio will rise 100 %

  16. RPJMN 2010-2014(Mid-Term National Development Plan 2010-2014)

  17. DIRECTION OF LONG TERM DEVELOPMENT PLANNING (RPJP) 2005-2024 IN INFRASTRUCTURE DEVELOPMENT • Sufficient and advanced Infrastructure • Government focus to the infrastructure development policy formulation, and enhancing private participation (PPP) • Development of water resources infrastructure • Development of transportation infrastructure • Development of post and telecommunication infrastructure • Development of energy and electricity infrastructure • Development of drinking water provision and sanitation infrastructure 2005-2024 MISSION • System of food security is directed to sustain reliability and independency of national food by developing domestic product • Fulfillment of housing infrastructure • Fulfillment of society basic needs in the form of drinking water and sanitation • To utilize the renewable natural resources • To manage the non-renewable natural resources • to sustain the energy provision • To sustain and conserve water resources • To mitigate natural disaster according to the Indonesia Geological Condition • To decrease the impact of coastal disaster and sea pollution

  18. Estimated infrastructure needs and priority for the next 5 years (2010 – 2014) (1) (2) (3) (4)

  19. Enhancement of infrastructure services according to the Minimum Standard of Services (SPM) • Rehability • Accessibility • Safety • Infrastructure support to the enhancement of Real Sector Competitiveness • New development • Enhancement of infrastructure investment through PPP FOCUS AND PRIORITYOF INFRASTRUCTURE DEVELOPMENT FOR 2010-2014

  20. WATER RESOURCES MANAGEMENT DEV’T TARGET Coverage and Improving Raw Water Services 2010-2014 Target 70,60 m3/sec 12,66 m3/sec Number of Dam Constructed Number of Small Dam/Ponds Constructed Performance2005-2009 Number of O & M Dams/Ponds Target 2010-2014 Development of Raw Water Infrastructure Performance 2005-2009 areas protected from flood hazards (thousand ha) Length of Coastal Protection (km) Improvement / rehabilitation of swamps (thousands / ha) Improvement of irrigation system (thousands ha) Rehabilitation of irrigation system (thousands ha) O & M irrigation system (thousands ha) O & M swamps system (thousands / ha) Performance 2005-2009

  21. From 83 % in 2009, National Road targeted 90 % in “Good Condition” and no damaged; Average vehicle velocity in increase from 44,4 km/hour to 60 km/hour in national road Share of cargo sea transport incease from : domestic 85, 7 % and export import 9 % in 2009 ; increase 100 % and 12,5 % respectively in 2014 Market Share of Railway Transport : Freight : from 0,6 % in 2009 to 7 % in 2010 and passenger from 6 % in 2009 to 23% in 2014 Keep growth of air transport passenger : domestic 9,78 % /year and non domestic 12,3%/year; Transportation dev’t target by 2014

  22. Housing and Settlement DEV’T TARGETS • Access to drinking water to 70% of total population which is divided into detailed target: 32% of piped system and 38% of improved non-piping system • The realization of Open Defecation Free condition (BABS), which is marked by the available access to off-site wastewater management system for 10% of the total population, either through a off-site wastewater treatment system at city-scale (5%) or communal scale (5%) and access provision and quality improvement of adequate on-site wastewater management systems for 90% of the total population • Access to solid waste management system for 80% of urban household • The reduction of inundation area of 22.500 hectares in 100 strategic urban areas

  23. Energy and Electricity Dev’t target by 2014 • Energy Mix • Oil Utilization : 38,33 % • New & Renewable Energy Utilization: 16,1 % • Energy Elasticity : 1,48 • Natural gas infrastructure development e.g. city gas distribution, natural gas station for transportation (SPBG) • Power plant additional capacity ± 30.500 MW • Electrification Ratio : 80,0 % • Rural Electrification Ratio : 98,9 %

  24. Financial structure for infrastructure GOVERNMENT PLAN • Public Private Partnership (PPP) • Government Plan: • finance by private • execute by private Central Government Financing (APBN) External Loans/Grants (PHLN) GOVERNMENT GUARANTEE FOR SOE’S PROJECT RUPIAH Blue Book PPP Book 24

  25. Central Government Financing Rupiah External Loan/ Grant Government Guarantee

  26. Estimation of infrastructure financing needs based on 5% of gdp

  27. ESTIMATION OF INFRASTRUCTURE INVESTMENT based on project readiness, 2010-2014 (Rp. Triliun) *) exclude PSO for PT. KAI, PT. Pelni, PT. Posindo, TVRI dan RRI

  28. ESTIMATION OF INFRASTRUCTURE INVESTMENT NEEDS 2010-2014 Needs Rp. 1,429 Trillion • Financing Gap (Rp. 519,58 trillion) 36,55 % • Govt ability (central % Local Gov’) (Rp. 902,3 trillion) 63,45 % FINANCING GAP is expected to be funded through PPP development, CSR, and community participation

  29. Estimation of Central goverment financing capacity for infrastructure 2010-2014 based on trend of national (*) Including Search and Rescue Agency

  30. Estimation of Central Gov’t FinancingCapacity for Infrastructure 2010-2014 *) *) Exclude financing from local goverment, private, and SOE **) Potential PPP Poject Rp 340 billion for water supply under DG. Housing and Resetlement . Currently, Water Conveyance in Banten (Karian) and Lampung are proceed as PPP project.

  31. Planning Process OF EXTERNAL LOANS AND GRANTS Minister of NDP Minister of Finance Donor/Lender M/A/LG/SOE RKPLN (Borrowing Strategy) Proposals Evaluation Lending Program DRPHLN-JM (Blue Book) Projects of LG/SOE Request for Indications of the LG/SOE’s financial capacity Indications of the LG/SOE’s financial capacity Synchronization of projects Projects of M/A Enhancing Preparedness Preparation of Detailed Activity Plan Funding Commitment Indication Readiness Risk Management DRPPHLN (Green Book) Fund Allocation List of Projects Loan/Grant Agreement RPKPHLN (Brown Book) Plan for Project Implementation 31

  32. DRPHLN-JM (Blue Book) • The Blue Book is in line with the period of medium-term development plan (5 years), issued after RPJM completed and could be up-dated if needed. • Currently in transition period, thus the new Blue Book cover period of 2006-2009. • Contains list of projects that are viable to be funded by external loans / grants and used as basis for preparing development cooperation with Donors/Lenders • The projects should : • be in line with RPJM and Borrowing Strategy (RKPLN) • be proposed and signed by Minister / Chairman of Agencies / Head of Local Governments / Director of State Own Enterprises ( One Gate Policy) • have approval letter from local parliament for project proposed by LG, and from Ministry of SOE for project proposed by SOE • Only projects listed in DRPHLN-JM will be proceed to financed by foreign assistance.

  33. DRPPHLN (Green Book) • Contains list of projects that already have indicative funding sources from lender/donor and will be negotiated within 1-2 year ahead. • The project listed in DRPPHLN should meet certain readiness criteria and ready to be Appraised, and will be put in Daftar Kegiatan (Definite Projects List) after having commitment for funding by lender/donor and put in corresponding annual work plan. Readiness Criteria: • detailed activity plan has already been compiled; • performance indicators on implementation of projects for carrying out monitoring and evaluation have already been compiled; • a statement is already available on the willingness of the Regional Government/BUMN to prepare funds for implementing projects that constitute the tasks of the relevant Regional Government/BUMN, including the availability of counterpart funds, in accordance with the schedule of implementation; • counterpart fund for the first-year implementation of the project has already been prepared in the Work Plan of the State Ministry/Agency/Regional Government/BUMN; • there is already the plan on procurement of land and/or on resettlement, including the availability of funds that are needed in the Work Plan of the State Ministry/Agency/Regional Government/BUMN; • the draft on the formation of the Project Management Unit and the Project Implementation Unit has already been compiled; • projects management plan has already been compiled

  34. Project Implementation Plan (RPK-PHLN/Brown Book) • Contains further information of signed and agreed project for project implementation. • Source of information for : • Monitoring and evaluation during implementation period. • Preparing DIPA (Government annual budget). • Assist Executing Agencies to implement projects in timely manner. • Should be prepared 3 months after Loan Agreement was signed (the latest).

  35. BLUE BOOK 2006-2009 INFRASTRUCTURE

  36. CANDIDATE INFRASTRUCTURE PROJECT FOR bb 2010-2014

  37. RECAPITULATION OF EXTERNAL LOAN FOR ON GOING PROJECT AS OF 31st DESEMBER 2009

  38. RECAPITULATION OF EXTERNAL LOAN FOR ON GOING INFRASTRUCTURE PROJECTS AS OF 31ST DESEMBER 2009 Note : Update 31tt Desember 2009

  39. EXISTING BILATERAL LOAN FOR ON GOING INFRASTRUCTURE PROJECTS AS OF 31ST DESEMBER 2009

  40. PROJECTS FINANCED BY CHINA soft loan

  41. GOVERNMENT GUARANTEE FOR SOE’S PROJECT GOVERNMENT GUARANTEE SOE BANK Loan PROJECTS Example : 10.000 MW PLN Project Phase I 41

  42. PUBLIC PRIVATE PARTNERSHIP (PPP)

  43. TYPE OF INFRASTRUCTURE FOR PPP SCHEME Transportation infrastructure Road infrastructure Infrastructure for the distribution of water Infrastructure for drinking water Waste water infrastructure Telecommunication infrastructure Electrical power infrastructure Oil and natural gas infrastructure.

  44. PPP CYCLE (BASED ON pd 67/2005) Selection and Priority • Complete • Test • Tender Process • Negotiation • Contract • Management • Project Study: • Need Analysis • Multi Criteria Analysis • Value for Money Analysis • Public Consultation • Identify and set priority project • Feasibility study: • Project Technical Evaluation • Social Cost Benefit Analysis • Social and Environment Analysis • Financial Analysis • Risk Analysis and Study • Identify the need of Government Support. • Choose PPP Form • Set Project to be tendered • Build Transaction Team • Prepare Offered Document • Pre-Qualification Tender Participants • Do the Tender • Evaluate Tender • Set Winner Candidate • Build Negotiation Team. • Prepare Negotiation Strategy • Prepare Risk Allocation Limit • Negotiate Partnership Agreement Draft • Set Winner • Make Sure and Monitor Financial Closing, Construction, Commissioning, Operation, Monitoring, and diversion in the end of concession.

  45. Government realize the importance of PPP to cover infrastructure financing gap; • Measures have been taken on: • Policy and regulatory framework • Institutional and financial framework • Project development facilities • Government is now in the final stage of completing the framework by establishing the PPP Central Unit (PPP-CU) and launching of the PPP Book. measures to support implementation of public private partnership (PPP)

  46. PPP as part of Government policy package 2006 • Issuance of Presidential regulation 67/2005 that governing the process of developing PPP projects; • Issuance of Presidential regulations 36/2005 and 65/2006 on Land Acquisition to outline the rules and procedures for infrastructure projects serving public purpose; • Minister of Finance Decree No. 38/2006 on risks management of PPP projects • Various ministerial decrees related to PPP implementation Current status of ppp implementation – POLICY AND REGULATORY

  47. KKPPI CMEA, Bappenas MSOE Infrastructure Sector Ministries (MPW, MOT, MEMR, MCI) MOHA MOF PPP Nodes (PPP Units) Project Identification, Preparation, Monitoring & Quality Control: -- Screening -- Due Diligence -- Bid Documents -- Transaction & Post-transactionProcess Secretariat/P3CU Policy Analysis, Development and Planning & Coord. Monitoring & Quality Ctrl Identify Projects requiringGovernment Support Resolving cross-sector issues Risk Mgt Unit Assess Government Support Issue SOEs Project Dev’t Project Impl. &Monitoring Local Gov’t & ROEs Project Development Project Impl. & Monitor Project Dev.Fac. & PPP Book Guarantee Fund IIFF, Land Fund, etc. • The Committee on the Policy for the Acceleration of Infrastructure Provision (KKPPI) established under PD 42/2005; • A Risk Management Unit on Fiscal Support already up and running since 2006 in the Ministry of Finance. • PT. SMI/Indonesia Infrastructure Financing Faciliy (IIFF) established in February 2009 • PDF to fund PPP projects preparation • PPP Nodes established in the (MEMR, MPW and MOT) • PPP Units in various Local Governments • PPP-CU in Bappenas issued PPP Book • Infrastructure Guarantee Fund (under preparation) Current status of ppp implementation – INSTITUTIONAL and financial

  48. GOVERNMENT SUPPORT FOR PPP PROJECT Direct Support (PD 36/2005 and PD 65/2006) Land Part of Construction Costs Government Guarantee (MoFD 38/2006) Political Risks Project Performance Risks Project Location Risks Project Operational Risks Demand Risks

  49. PPP Book - background • Based on Presidential Instruction (Inpres) No. 5/2008 on Economic Development Focus 2008-2009 • To confirm list of PPP Projects in the Government pipeline; • To ensure that the PPP project planning is transparent and preparations are done properly; • As an instrument to monitor the progress of PPP implementation; • As a mean for cross-sector and inter-region synchronization and coordination for PPP project preparation • As a mean for Public Consultation on PPP projects 49

  50. PPP BOOK – CRITERIA • Conformity with the National/Regional Medium Term Development Plan and the infrastructure sector’s strategi plan; • Conformity of the project’s location with the spatial plan; • Linkage between the infrastructure sector and regional area; • Cost recovery potential POTENTIAL PR0JECTS PRIORITY PROJECTS PROJECTS READY FOR OFFER Included in the list of PPP Potential projects or proposed by the contracting agency as unsolicited project; Pre-FS shows that the project is feasible (legal, technical, economic and financial); Project risks identified and allocated properly; PPP Modality defined; Government support identified; Bidding documents completed; PPP Procurement Team formed and capable to transact project; Procurement schedule defined and agreed upon; Government support (if applicable) has been approved and allocated 50

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