Indonesia

Indonesia

Infrastructure procurement: To accelerate economic growth, infrastructure investment is highlighted as a priority in Indonesia’s National Medium‐Term Development Plan (RPJMN 2015–2019), National Long-Term Development Plan (RPJPN 2002-2025) and Masterplan for the Acceleration and Expansion of Indonesia’s Economic Development Plan (MP3EI 2011–2025).

The MP3EI sets targets for infrastructure funding and envisages a high degree of cooperation among central government, local governments, state owned enterprises and the private sector. The RPJMN estimates financing requirements of IDR 5300 trillion, of which 44% would be financed through national and local authorities, 22% from state-owned enterprises and the remaining 22% through private sector investments.

PPP projects: Despite the existence of a complete PPP framework, very few projects have so far reached completion. Until recently, PPPs were only a feature in the toll roads sector. Recent reforms have created enabling conditions for PPPs, with the establishment of an APEC Pilot PPP Centre in Indonesia (2013) aiming to improve the situation.

Overview of Public Interventions
Subsidies & Guarantees
Infrastructure Tax Incentives The government offers incentives in the Income Tax Law to encourage investments in certain qualifying business sectors and regions. The main incentives are:


• Investment allowance of 30%
• Accelerated depreciation of fixed assets which is twice as fast as the normal rate
• Tax loss carried forward a period of ten years instead of five
• Reduction of tax withholding on dividends paid to foreign shareholders, from 20% to 10%
• Income tax exemption for five to ten years and a 50% income tax reduction for two further years for eligible companies active in 'pioneer' industries which introduce new technologies and/or have high externalities and provide additional value for the national economy.

Revenue Guarantees Availability Payment is a scheme operated by the Ministry of Finance to reduce demand risks in PPPs.
Guarantees Indonesia Infrastructure Guarantee Fund (IIGF)
The IIGF (in Indonesian: PT Penjaminan Infrastruktur Indonesia) was established in 2009 by the Government of Indonesia with support from the World Bank, with the aim to increase private participation in infrastructure provision by reducing political risks.


IIGF acts as a single window for evaluating projects that seek government guarantees covering the private sector against contractual risks relating to government (in)action. Thanks to IIGF's BBB- rating (Fitch), guarantees can lead to credit enhancement and an improved access to financing. The fund covers political risks on the sub-sovereign level and provides direct technical assistance to local contract agencies. Guarantees transfer risks to the government in each PPP contract. Eligible forms of investment range from loans and mezzanine financing to equity. The political risks covered by IIGF include:


• Currency inconvertibility and transfer
• Expropriation and repossession
• Force majeure
• Unfair changes in the law
• Non-honouring of financial obligations
• Delays in the processing of permits and licenses
• Changes of rules and regulations
• Lack of tariff adjustment
• Failure to connect the facility to the network/facilities


Contact:
Indonesia Infrastructure Guarantee Fund (IIGF)
Sampoerna Strategic Square, North Tower, 14th Floor
Jl. Sudirman Kav. 45-46.
Jakarta 12930, Indonesia
T: +62-21-5795 0550
F: +62-21-5795 0040
E: info@iigf.co.id
Website: www.iigf.co.id

Grants/soft loans
Viability Gap Funding (VGF) Established by the Ministry of Finance in 2012 (see Presidential Regulation (PR) No. 56/2011), VGF seeks to provide capital to help cover construction costs, in order to support the commercial viability of projects. Its objectives are:


1. To increase the financial viability of the project;
2. To increase certainty of infrastructure project provision in accordance with the designed quality and timing; and
3. To enhance the provision of public services through infrastructure with affordable tariffs.

PT Sarana Multi Infrastruktur (SMI) Established in 2009, AMI is a project development facility responsible for accelerating the supply of infrastructure financing through partnerships with banks and multilateral financial institutions. It further supports PPP projects through assisting in their preparation, providing advisory services and helping with negotiations.


Contact:
Wisma GKBI Building, 8th Floor
JL. Jend. Sudirman, No. 28
Jakarta, 10210, Indonesia
T: +62 21 57851499
Website: www.ptsmi.co.id/

PT Indonesia Infrastructure Finance (IIF) The IIF (in Indonesian: P.T. Sarana Pendanaan Infrastruktur Indonesia) is a private (non-bank) financial institution under the Ministry of Finance, which was jointly funded in 2010 by the government of Indonesia, Asian Development Bank (ADB), World Bank and two private financing institutions.


IIF offers financing across the whole spectrum of capital structure (equity participation, mezzanine finance, senior loans) and provides guarantees and fee-based services. It focuses on investing in commercially feasible infrastructure projects to address the barriers to the flow of private investments in infrastructure.


Contact:
The Energy Building, 30th Floor
Sudirman Central Business District, Lot 11A
Jl. Jend. SudirmanKav. 52-53
Jakarta 12190, Indonesia


T: 62-21-2991 5060
F: 62-21-2991 5061
E: info@iif.co.id
Website : www.iif.co.id

Pusat Investasi Pemerintah (PIP) The Government Investment Unit of Indonesia, or Indonesia Investment Agency/Pusat Investasi Pemerintah (PIP), is Indonesia’s sovereign wealth fund, managed by the Ministry of Finance.


PIP holds operational responsibility for central government’s investment management, and aims to foster economic growth through the acceleration of infrastructure development and investments in strategic sectors.~

Others The Geothermal Fund Facility finances geothermal exploration, which aims to increase the contribution of renewable energy resources and to make the geothermal projects become financially viable and bankable, by providing exploration data that is verified by reputable international institutions.
Other Public Support
Land Acquisition Support: The Land Fund seeks to accelerate land acquisition for PPP projects through e.g. the Land Capping Fund and the Land Revolving Fund.
Project Development Facility The Project Development Facility aims to strengthen private participation in infrastructure investment through:


• Providing financial support and assistance to Government Contracting Agencies (GCAs) for project preparation;
• Providing GCAs with access to experts and consultants required in the project preparation;
• Providing assistance to GCAs in proposing government support and/or guarantee