Indonesia Infrastructure Report Q3 2009

In March 2009, Indonesia's National Development Planning Agency (Bappenas) reportedly opened up eight major infrastructure projects in transport and utilities as public private partnerships (PPPs). The government has admitted that it cannot bear the burden of financing its long-term infrastructure programme (2010-2014), which consists of 87 projects, solely though public funds and is thus seeking private sector participation.

According to the Jakarta Globe, the total value of the contracts the government is offering through these eight projects is US$4.5bn. These eight projects are 'ready to go', which is defined as having completed bidding documents, a dedicated team to handle the procurement and the government's backing in terms of land acquisition and financing guarantees, the newspaper notes. It remains to be seen if this will tempt potential investors, previously put off by the arduous land-acquisition processes in an already difficult operating environment compounded by the financial crisis, uncertain demand for energy and transport infrastructure, and tightening liquidity.

The Ministry of Public Works will reportedly receive IDR1.7trn (US$147.9mn) of the Indonesian government's US$6.15bn stimulus package. The fund will be used to construct up to 3,000km of road projects in 2009, and is forecasted to create almost 55,000 new jobs. The funds will be used to support existing national roads as well as to fund four Bina Marga projects: Lintas Timur Sumatra in Lampung Province, the Amplas flyover in the north Sumatra provincial town of Medan, the Manado-Mapangat Road in North Sulawesi Province, and the Manokwari-Sorong Road in West Papua Province. Indonesia has experienced very rapid growth in the total number of road vehicles in circulation. Despite being given a high priority in government spending programmes, road construction in Indonesia as a whole has progressed at a slower pace.

According to the Asian Development Bank (ADB), infrastructure investment in Indonesia has risen to 3.0-3.5% of GDP. However, this is still substantially lower than the 5-6% of GDP witnessed before the onset of the Asian financial crisis in 1997. Most of the recent investment has been by the government, with private investment accounting for only about 1% of GDP between 2000 and 2006. BMI forecasts that the construction sector will reach a value of US$75.33bn in 2013, up from a figure of US$37.56bn in 2008.