Artikel DJKN

National Strategic Project as Regional Public Goods in Indonesia

Selasa, 09 Juni 2020 pukul 13:33:58   |   205 kali
  1. Introduction

To improve Indonesia's productivity and competitiveness in the global market competition, the Government of Indonesia set infrastructure development as the new policy in the medium-term development plan of 2015-2019. Infrastructure development aims to achieve economic growth by maintaining regional economic growth. The Government of Indonesia established several infrastructure development projects into national strategic projects to improve economic growth.

An infrastructure development project will be a national strategic project with the consideration that the project is considered strategic and important to be completed in a short time and has a goal to increase growth and equitable development in order to improve the welfare of society and regional development. The Government is concerned and will work towards the national strategic project with the aim of accelerating the process of completion of the project in order to immediately promote economic growth.

The main difference between a project becoming a national strategic project and a regular project is the government's attention to the project. National strategic projects will receive more attention from the government through the granting of special facilities from the government so that the project can be completed in a faster time. Implementers of national strategic projects are the Central Government, Local Governments, and/or business entities that have strategic characteristics.

  1. Regional Public Goods in Indonesia

The result of the national strategic project will be the public goods provided by the Central Government to the public society. The basic criteria of public goods that could be a national strategic project and funded by the central government are to conform to the national or regional medium-term development plan and the strategic plan of the infrastructure sector and to conform to the spatial and regional plans. The location of the national strategic project is in the region, as a result, the project will be used in the region as a regional public good in the area where the project is located and other areas in the vicinity.

Therefore, the public goods must fulfill strategic criteria that have strategic role to the economy, social welfare, defense and national security that contribution to regional GDP and national GDP, employment, socio-economic effect, and environmental effect, have interconnection between infrastructure and inter-sector sectors region or having complementary effects, and diversity of distribution between islands or balancing between development in western and eastern part of Indonesia.

Furthermore, the project should have operational criteria in the form of proposed projects should have pre-feasibility study and project investment value above Rp100 billion or the project has a strategic role in encouraging the growth of the regional economy. Considering that the acceleration of provision of priority infrastructure in an effective, efficient, timely manner plays an important role in realizing the acceleration of economic growth to realize the welfare of the people, the Government of Indonesia has stipulated Presidential Regulation Number 75 of 2014 on Accelerating Provision of Priority Infrastructure.

In accordance with the regulation, priority infrastructure includes transportation infrastructure, road infrastructure, irrigation infrastructure, drinking water infrastructure, wastewater infrastructure, garbage facilities, telecommunication and informatics infrastructure, electricity infrastructure, and oil and gas infrastructure. With the existence of the national strategic project, regional public goods can be provided by the Central Government. The central government helps the transfer of development from central to regional so that development is not only concentrated in big cities. Thus the benefits of public goods can be felt by the people who live in one area, but also the people who live around the area so that the public goods have inter-regional links that are linked by the public goods. It satisfies the principle of positive externalities of public goods.

The Government of Indonesia has set 245 projects that become national strategic projects in Presidential Regulation Number 58 of 2017. According to the Presidential Regulation, a national strategic project is established which will produce public goods, both located in the Central Government area of ​​Jakarta, as well as in the vicinity of the capital city of Jakarta, and other projects spread throughout the region in Indonesia. Types of public goods built are toll roads, non-toll national roads, inter-city railway infrastructure, railway infrastructure and facilities, airport revitalization, new airport development, other strategic airport projects, new port development and development capacity of ports, construction of oil refineries, LPG gas pipelines and terminal projects, garbage energy infrastructure projects, water supply projects, provision of communal wastewater system infrastructure, construction of flood retaining embankments, trans boundary postal development projects and supporting facilities, dam projects and irrigation networks, increased broadband coverage, other strategic infrastructure projects, construction of priority industrial zones and special economic zones, tourism, smelter development, fisheries and marine projects, electricity infrastructure development and aircraft industry projects.

Based on Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) data, up to the first semester of 2017, there are 26 National Strategic Projects (NSP) from various sectors that have been successfully completed with total investment value reached Rp47 Trillion. In addition, the Government has established a list of priority infrastructure through the Regulation of the Coordinating Minister for Economic Affairs Number 12 of 2015 on the Acceleration of Preparation of Priority Infrastructure consisting of 30 projects, which 43% are in construction and 10% in the transaction stage as of June 2017 (KPPIP, 2017).

  1. Public Goods Funding

The national strategic project program that generates regional public goods as the target of development by the Central Government. Similarly, the funding mechanism of each project has been determined by the Central Government, while its development can be implemented by ministries or institutions or business entities. National strategic project financing can be sourced from the State Revenue and Expenditure Budget; Regional Revenue and Expenditure Budget; business entities through the mechanism of cooperation between the government and business entities; state-owned enterprises; regional owned enterprises; and/or other legitimate sources of funds.

In accordance with Presidential Regulation Number 58 of 2017, the Government has established projects and locations of national strategic projects as many as 245 NSP and 2 electrical program and aircraft industry program. To fund a national strategic project, the government has estimated the required fund of Rp4,197 Trillion. To close the financing, the Government conducted a joint cost so that the total funds sourced from the state budget amounting to Rp525 Trillion, SOE amounting to Rp1,258 Trillion, and Private Rp2,414 Trillion (KPPIP, 2017).

NSP might use funds derived from the state budget and other mechanisms outside the state budget. The funding mechanism adopted by the Government in addition to using the state budget is through the government's cooperation mechanisms with business entities, Non-Budget Infrastructure Financing, and the Concept of Limited Concession Scheme (LCS). Mechanisms other than the national budget use are taken so that infrastructure development projects do not burden the state budget. Although project funding does not use the national budget, however, infrastructure development projects are expected to continue to operate and maintain accountability. The Central Government through the Committee for Acceleration of Priority Infrastructure Delivery (KPIP) oversees projects that have been targeted by national strategic projects.

  1. Budget Financing

The Government of Indonesia through the Ministry of Finance already has a government agency assigned to finance national strategic projects called the state asset management agency (LMAN). LMAN is a work unit in the form of a public service agency that performs the tasks and functions of state asset management by applying the financial management of public service agencies.

One of the functions of the State asset management agency as a public service agency under the Ministry of Finance is to serve as a land bank. In carrying out its functions as a land bank, LMAN finances land for infrastructure development to be used in NSP. Thus LMAN is the principal funding provider for the procurement of strategic national project land whose funding is sourced from state budget. Another function of LMAN is to manage potential state assets to generate financial and nonfinancial benefits and offer property solutions (Lembaga Manajemen Aset Negara, 2018).

The existence of LMAN as supporting the task of the Government of Indonesia to provide regional public goods with national strategic character. The source of LMAN fund is derived from the state budget through state equity participation as a form of government investment. Funds provided by the Government for LMAN from 2015 amount to Rp1.5 trillion; the year 2016 of Rp16 Trillion; the Year 2017 of Rp32.05 Trillion; the year 2018 of Rp35, 40 Trillion (Finance, 2017). The amount of funds provided by the central government for LMAN funding shows the government's high attention to the completion of national strategic projects in order to provide public goods.

Although the national strategic project funding is implemented by the central government through LMAN, the project positions are spread throughout Indonesia. To that end, the central government is working with local governments to implement strategic projects that are mostly located in the regions. The development of national strategic projects in the regions is done to accelerate connectivity so as to grow new economic centers and reduce logistics costs such as the construction of toll roads, ports, and railways. The development result will be a regional public good belonging to the central government.

Regional public goods that become national strategic projects and funded by LMAN are among others toll roads, dams, railways, and ports. Most of the new toll roads built are in the area. Total LMAN-funded toll roads are 27 new toll roads with a total length of toll road of 1,286.74 km with a total allocation of Rp 15.50 trillion in 2016, 2017 is allocated Rp20.80 trillion and in 2017 Rp11.88 Trillion. The toll road segment constructed is Pejagan-Pemalang segment; Bakauheni-Terbanggi Besar; Outer Circle of Bogor; Manado-Bitung; Batang-Semarang; Semarang-Solo; Barrier-Trunk; Gempol-Pasuruan; Bekasi-Cawang-Kampung Melayu; Cengkareng-Kunciran; Cibitung-Cilincing; Balikpapan-Samarinda; Pandaan-Malang; Depok-Antasari; Cimanggis-Cibitung; Kunciran-Serpong; Cinere-Serpong; Cinere-Jagorawi; Soreang-Pasirkoja; Solo-Ngawi; Ngawi-Kertosono; Kertosono-Mojokerto; Surabaya-Mojokerto; Medan-Binjai; High-Tebing Field; Palembang-Sp Indralaya; and Pekanbaru-Kandis-Dumai (Lembaga Manajemen Aset Negara, 2018).

Besides toll roads, the national strategic project funded by LMAN is a dam. The number of LMAN-funded dams amounts to 26 dams across Indonesia with a total area of ​​31.84 million m2. The allocation of land acquisition for 2017 reached Rp2.22 Trillion. Dams to be built include Keureuto, Aceh; Way Sekampung, Lampung; Lau Simeme, North Sumatra; Three Dihaji, South Sumatra; Rukoh, Aceh; Margatiga, Lampung; Karian, Banten; Ciawi, West Java; Sukamahi, West Java; Cipanas, West Java; Kuningan, West Java; Leuwikeris, Ciamis, West Java; Gongseng, East Java; Pidekso, Central Java; Tugu, East Java; Bener, Purworejo Central Java; Tapin, South Kalimantan; Lolak, Bolaang Mongondow, North Sulawesi; Kuwil Kawangkoan, North Sulawesi; Ladongi, Southeast Sulawesi; Passeloreng, South Sulawesi; Karalloe, South Sulawesi; Tanju, Dompu, NTB; Sidan, Badung, Bali; Panukkulu, South Sulawesi; and Way Apu, Buru, Maluku (Lembaga Manajemen Aset Negara, 2018).

  1. Non-Budget Financing

In order for infrastructure development projects not to burden the state budget, there are several alternative funding for national strategic projects pursued by the Government of Indonesia. One of the mechanisms taken by the Government of Indonesia is through the scheme of cooperation between the Government and Business Entities or Public Private Partnership (PPP). With the scheme, it is expected that the limited availability of funds in the state budget could be overcome. To build infrastructure projects, the government invites private parties to participate in supporting development through funding of infrastructure projects.

To simplify the investment climate and business implementation in Indonesia and support the ease of implementation of the PPP, the Government of Indonesia has established policy reform and developed the instruments needed to support the implementation of the PPP scheme in Indonesia. The government seeks to support the implementation of the PPP through fiscal reforms, namely to issue support in fiscal contributions such as Viability Gap Funding (VGF), Availability Payment (AP), Land Revolving Fund and risk allocation guidance as the basis for guarantee of project implementation by one of the SOEs namely PT Penjaminan Indonesia Infrastructure (PT PII).

To support the fiscal reform related to PPP, the government also implemented institutional reform through the establishment of several institutions that play a role in accelerating the provision of infrastructure, namely the Committee for the Acceleration of Provision of Priority Infrastructure (KPPIP). KPPIP was established to coordinate the acceleration of priority infrastructure projects. The Indonesian government also has a state-owned enterprise engaged in infrastructure financing, PT Sarana Multi Infrastruktur (PT SMI). PT SMI is tasked to finance and build infrastructure project preparation either through consultancy services or infrastructure development projects in Indonesia. The existence of PT SMI is expected to support the acceleration of infrastructure development with a focus on the implementation of public-private partnership program by involving various financial institutions both private and multilateral (PT Sarana Multi Infrastruktur, 2018).

PT SMI has a subsidiary company called PT Indonesia Infrastructure Finance (IIF) which was established to be a catalyst in accelerating infrastructure development in Indonesia. In addition, PT IIF is expected to increase private participation in financing infrastructure development in Indonesia through the provision of fund-based products such as long-term loans and non-fund based products such as guarantees and other services related to infrastructure projects.

The next step of improvement made by the Government of Indonesia to support the KPBU is the general regulatory reform through arrangements in the acceleration of infrastructure development. Government support through the reform of ease of conducting business in Indonesia as well as supporting the ease of implementation of the above KPBU is expected to facilitate and multiply the implementation of the KPBU in Indonesia, which ultimately helps the provision of public goods in Indonesia. Examples of the implementation of the KPBU are the Palapa Ring Broadband Project The Western, Central and Eastern Package, which is the first Government Business Entity (KPBU) project to implement an Availability Payment (AP) scheme. Availability Payment also involves key strategic investors and financial investors who can increase trust and confidence of other potential investors to implement the KPBU project in Indonesia. Not only for investors, the benefits are also felt by the Ministry of Communications and Information Technology, with this project, transfers of knowledge from strategic investors to Ministry of Communications and Information Technology and local investors. In addition, the capacity of Ministry of Communications and Information Technology can also be enhanced related to procurement of PPP projects with fiscal support from the Government such as AP.

Another funding mechanism that does not burden the State Budget is the Government's Non-Government Infrastructure Financing (PINA). PINA is a Non-Government Financial Investment Financing that raises alternative funding sources to contribute to financing strategic infrastructure projects that have commercial value and have a positive impact to improve the Indonesian economy (KPPIP, 2017). The PINA program is designed to fill the funding deficiencies in priority infrastructure projects that require large capital but are still considered commercially feasible.

Currently, the PINA program has succeeded in pushing initial financing on nine toll roads worth Rp70 trillion, five of which are Trans Java toll road. In this PINA pilot program, PT SMI and PT Taspen provide initial equity financing to PT Waskita Toll Road amounting to Rp3.5 Trillion, bringing the total equity to Rp9.5 Trillion out of the total requirement of Rp16 Trillion. To fund infrastructure projects but still not burden the state budget, the Government of Indonesia seeks to seek alternative funding mechanisms for the state budget. The new alternative that the Government will take in infrastructure financing is the Limited Concession Scheme (LCS). Through this scheme, the Government is expected to obtain fresh money for infrastructure funding by optimizing existing infrastructure assets through concession granting. LCS implementation tends to be easier to implement given the short preparation time (about 6-18 months) and this scheme has been successfully implemented in a number of countries formed a positive precedent in the private sector. Details of the national strategic projects according to Presidential Regulation Number 58 of 2017.

  1. Impact of Infrastructure Development

The high portion of funding for infrastructure projects has benefited Indonesia's economic growth. The high allocation of infrastructure expenditure in state budget during 2012 until 2016 has a positive correlation with the increase of GDP as follows:

(Trillion Rupiah)

Year

2012

2013

2014

2015

2016

Infrastructure Budget

907,45

1.011,88

1.164,70

1.316,88

1.439,38

GDP Infrastructure Sector

145,5

184,3

177,9

290,3

317,1

Source: KPIP Report January-June 2017

As one of the impacts of the massive development in the infrastructure sector, Indonesia's economic growth in 2017 reached 5.19% and GDP per capita reached Rp51.89 million (Berau, 2018). A number of infrastructure-related sectors have contributed to an increase in the growth rate of the construction industry contributing 10.25% of total GDP with a growth rate of around 0.61% in the first quarter of 2017 (KPIP report of first semester 2017). In more detail, based on KPPIP report there is an indication that the development of projects in the NSP list has driven the economy in the project development area concerned. For instance, the regional economy in West Papua Province increasing because of the regional public goods. With total investment value of NSP reached Rp106 Trillion, West Papua Provincial regional GDP in the construction sector increased significantly by 12.45% in 2014; 9.73% in 2015; and 9.77% in 2016 compared to the average GDP growth in the national construction sector which is only in the 5% range (KPPIP, 2017). In addition, growth in the construction sector grew higher than that of the West Papua Provincial GDRP in general which grew by 5.44% in 2014; 4.1% in 2015; and 4.52% in 2016. For the labor sector, the construction also showed employment in West Papua increased from 22,980 workers in February 2014 to 30,388 in August 2016 (KPPIP, 2017).

The high value of NSP investment located in the region and into regional public goods, although still under construction, has shown a positive effect of increasing GDP growth in other regions, for example in East Java Province with total investment value of Rp83.4 Trillion growing 5, 4% in 2014; 3.6% in 2015 and 5.07% in 2016. Meanwhile, Central Java Province with the total investment value of NSP which has entered construction phase worth Rp44.3 Trillion grew 4.38% in 2014; 6% by 2015; and 6.88% in 2016. GDP growth shows the benefits of regional goods, even though the projects are under construction. Thus, if regional public goods have been completed, it will have potential benefits for the regions, both in terms of increasing the regional GDP as well as from the use of regional public goods and the economic impact of the implementation of NSP is also expected to be more felt for the community.

  1. Conclusion

The Government of Indonesia has a new policy of massive infrastructure development aimed at achieving economic independence while maintaining that regional economic sectors can continue to advance and support the economic movement of the central government. Some infrastructure projects become national strategic projects with the consideration that the project is considered strategic and important to be completed in a short time and aims to increase growth and even distribution of development.

The result of the national strategic project will be the public goods provided by the Central Government to all the people. Most locations of national strategic projects are located in the regions and will become regional public goods used in the region.
The high portion of funding for infrastructure projects has benefited Indonesia's economic growth. As one of the impacts of the massive development in the infrastructure sector, Indonesia's economic growth in 2017 reached 5.19% and GDP per capita reached Rp51.89 million.

Penulis: Hendro Nugroho, Kepala Seksi Informasi, Bidang Kepatuhan Internal, Hukum dan Informasi, Kantor Wilayah DJKN Sulawesi Selatan, Tenggara, dan Barat


References

(KPPIP), C. f. (2017). KPPIP Report January-June. Jakarta.

Presidential Regulation Number 58 of 2017. (2017, June 15). Jakarta.

Berau, I. S. (n.d.). Badan Pusat Statistik. Retrieved March, 2018 from Badan Pusat Statistik: https://www.bps.go.id/subject/169/produk-domestik-bruto--pengeluaran-.html#subjekViewTab3

Finance, M. o. (2017). Government Financial Report. Jakarta: Ministry of Finance.

Indonesia, G. o. (2014, July 17). Presidential Regulation Number 75 of 2014 . Jakarta.

KPPIP. (n.d.). Retrieved March, 2018 from Komite Percepatan Penyediaan Infrastruktur Prioritas: https://kppip.go.id/proyek-strategis-nasional/

Lembaga Manajemen Aset Negara. (n.d.). Retrieved March, 2018 from Lembaga Manajemen Aset Negara: http://lman.kemenkeu.go.id/lman/pendanaan.xhtml

PT Sarana Multi Infrastruktur. (n.d.). Retrieved March, 2018 from PT Sarana Multi Infrastruktur: https://www.ptsmi.co.id/id/tentang-kami/tentang-pt-smi/
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