In contrast to some ASEAN peers, the Jokowi government is determined to finance some of the country's major projects via funding from mostly state-owned enterprises, acknowledging that some PPP projects stall due to political interference.
In order to aid the Indonesian government in its development program, the Asian Development Bank (ADB) approved combined funding of $10 billion for both physical and social infrastructure in February 2016.56
However, this funding and government spending alone are not sufficient to fund Indonesia's master plan of about $470 billion spending in infrastructure investment. The authorities acknowledged that both domestic and foreign investor participation are essential to bridge the country's infrastructure funding needs.57
Consequently, there have been market friendly reforms in recent times, such as a streamlined infrastructure project approval process (see Exhibit 23), and the revised land acquisition law passed in February 2015. With this revised law, infrastructure projects are expected to face fewer headwinds; this is especially true of road works (both toll and non-toll), which should progress towards completion much faster in the near future. This will help Indonesia better address its issues of heavy traffic congestion and high logistics costs.
In the energy sector, the administration has implemented a three-stage Fast-Track Programme that looks to add 35 GW of new capacity by 2019, with a goal to push the electrification rate from 79.6 percent in 2013 to 97.8 percent in 2022.58 In order to meet this goal, the government has not only invited independent power producers to build power plants and supply electricity, but has also refined its regulations on land acquisition to garner more interest from the private sector. Recent changes in regulation affect PLN's traditional risk allocation terms, though it remains to be seen exactly how this will impact future project bankability.38
They have also started providing guarantees for Indonesia's State Electricity Company, PT PLN, to honor power purchase agreements to mitigate the risks for private investors and to increase bankability of projects.59 In addition, the government is striving to generate about a fifth of its total energy consumption through renewable sources by 2019, which has led to the rise of a number of large-scale renewable energy construction projects. One notable project underway is the construction of the 6.09 GW Kayan River hydroelectric power plant project in North Kalimantan that has an investment of about $18 billion.60