Regional Strategic Infrastructure Development

Balikpapan 27/2/13. Coordinating Minister for Economic Affairs Hatta Rajasa gave a presentation entitled Non-Conventional Approaches to Financing Development of Regional Strategic Infrastructure to Accelerate the Development of Six Indonesian Economic Corridors at the IV National Working Meeting of the Indonesian Provincial Bappeda Association at the Green Senyiur Hotel Jl. ARS Muhammad No.7 Balikpapan.

Implementation of the IV National Working Meeting of the Indonesian Provincial Bappeda Association at the Green Senyiur Hotel, Jl. ARS Muhammad Number 7 Balikpapan City from 26 to 28 February 2013 with the theme "Multi-Party Planning Synergy for Successful Quality and Accountable Development of Infrastructure, Population and Environment" was officially opened by the Governor of East Kalimantan, DR.H. Awang Faroek Ishak.

The Fourth National Working Meeting of the Indonesian Provincial Bappeda Association was attended by approximately three hundred and fifty participants consisting of all the heads of Provincial Bappeda throughout Indonesia or representative officials and related officials within the provincial governments of Indonesia, the Ministry of Bappenas, the Coordinating Ministry for Economic Affairs, the Ministry of Finance, the Ministry of Tourism and Creative Industries, and all the Heads of Bappeda throughout East Kalimantan.

In his presentation, the Coordinating Minister for Economic Affairs stated that it was necessary to learn from the important lessons that had been implemented by China in its very rapid economic development, namely: (1). Since the mid-90s, the contribution of infrastructure spending has been consistent at around 9-11 percent of GDP; (2). The contribution of the Government budget (central and regional) for infrastructure increased from around 3% in the mid-90s to around 7% around 2000, and finally decreased again to 4% in 2005. This shows the importance of the Government's role as a leader in accelerating infrastructure development before the private sector finally takes an interest; (3). Apart from providing a number of tax incentives for infrastructure development, private involvement (whether through PPP or not) is strongly encouraged, among other things, by the aggressiveness of BUMN in developing forms of financial engineering in infrastructure financing (especially the relatively highly developed infrastructure bond market in China).

Meanwhile, there are very valuable lessons from India regarding economic development so rapidly that it is one of the countries in Asia which is very influential in improving its economy by carrying out various priority programs, including: (1). Rapid progress in India's infrastructure development occurred in the period 2005 – 2010. Infrastructure investment increased rapidly from around 5% of GDP to around 8% of GDP; (2). The PPP mechanism is taken very seriously by the Government of India. Apart from that, since the early 2000s, various other financial engineering models have been developed, such as infrastructure bonds and performance based annuity schemes (PBAS), namely payments for infrastructure completed by the private sector through public budgets allocated successively for a period of 5 – 10 years.

National Policy Recommendations

1. Learning from conditions before the 1998 crisis and also experiences from China and India, the acceleration of infrastructure development must be driven by the commitment of the Government (including Regional Governments). The infrastructure budget allocation needs to be increased to 3-4% of GDP. This is initial capital to build the "trust" of investors who are interested in contributing to infrastructure development;
2. The expansion of infrastructure development driven by MP3EI needs to be understood that the limited funding by the Government cannot only depend on the implementation of the PPP pattern because many regions in Eastern Indonesia (especially) require support for accelerated development which is higher than other regions. PPP is only feasible for relatively developed areas;
3. Through the spirit of MP3EI, projects are currently being selected (through a bottom up and professional process) for HIGH PRIORITY infrastructure for which the government will pay special attention to funding (not limited to conventional APBN budgeting patterns). The commitment of all parties to consistently implement in accordance with the initial agreement will be a very important signal for investors and financial institutions;
4. In developing PPP programs, apart from strengthening coordination and integration of the programs offered (it is very necessary to have a list that is agreed upon by all relevant government elements), the rules of the game need to be improved so that they are competitive with existing PPP offers in competing countries. It needs to be acknowledged that the attractiveness of the PPP program offered by Indonesia is often considered less attractive than those offered by neighboring countries.
5. The assignment of BUMN which has recently been encouraged is an important breakthrough that needs to continue to increase the intensity and quality of the management process. For this purpose, several steps need to be taken immediately to mobilize funding, especially: a. Utilize direct loan facilities with cheap interest from multilateral/bilateral financial institutions (WB, ADB, JICA, etc.). Need to adjust the rules; b. Encourage BUMNs assigned to carry out IPOs, issue infrastructure bonds, or utilize pension and insurance funds; c. It is necessary to explore the use of credit guarantee facilities by international financial institutions in order to reduce interest rates and extend the repayment period for loans to private banks (a kind of back-to-back credit guarantee, this requires a government guarantee); d. Project assignments by BUMN will have a more attractive "selling value" if the scope of the task is expanded to include managing the area around the infrastructure being built.
6. Strengthening infrastructure financial institutions such as PT SMI or PT. IIF (Indonesia Infrast. Finance) with the addition of PMP or encouraging collaboration with other financial institutions (domestic and foreign) to mobilize funds suitable for long-term investment;
7. Increasing capacity and expanding financing through the Sukuk scheme has been very successfully implemented in Malaysia because the "profit sharing" principle which is the essence of this scheme not only provides a cheaper "cost of money" compared to the interest system but, more importantly, also provides a tighter control system over the pattern of fund utilization. The question now is, to accelerate the expansion of its implementation, will it only be limited to sharia financial institutions?

Meanwhile, speakers at the IV National Working Meeting of the BAPPEDA Association of Provinces throughout Indonesia include:
1. Coordinating Minister for Economic Affairs, DR. Hatta Rajasa;
2. Minister of National Development Planning/Head of Bappenas, Prof. Dr. Armida Salsiah Alisjahbana, SE., MA;
3. Deputy Minister of National Development Planning/Bappenas for Regional Development and Regional Autonomy;
4. Directorate General of Financial Balance, Ministry of Finance;
5. Directorate General of Tourism Destination Development, Ministry of Tourism and Creative Economy;
6. Director of Areas and Land for Regional General Government, Ministry of Home Affairs;
7. Assistant Deputy for Spatial Planning and Regional Development of the Coordinating Ministry for Economic Affairs;
8. Head of DKI Jakarta Bappeda;
9. Head of West Java Bappeda;
10. Head of East Kalimantan Bappeda, DR.Ir.H. Rusmadi.MS; and
11. Head of Bappeda East Nusa Tenggara Province.

Formula of the 2013 National Working Meeting of the Indonesian Provincial Bappeda Association in East Kalimantan

Based on the presentations of the speakers and participants' discussions as well as the results of the study and analyzing the various thoughts expressed by the speakers, the Heads of the All-Indonesian Provincial Bappeda who were present at the Fourth National Working Meeting of the All-Indonesian Provincial Bappeda Association agreed to take strategic steps to realize accelerated development in the regions to support national targets through quality and accountable development planning.
Based on the above matters, the Association of Provincial Bappeda throughout Indonesia, declares several things, namely:
1. Assign the Association Management to monitor and communicate more intensively with Ministries/Institutions regarding the results of the 2012 Third National Working Meeting Declaration in Ambon, Maluku Province;
2. Immediately follow up on the direction of the Coordinating Minister for the Economy of the Republic of Indonesia at the IV 2013 National Working Meeting in Balikpapan, East Kalimantan Province to propose the urgent need for infrastructure development to spur the implementation of MP3EI in each corridor;
3. Intensive cooperation is needed in improving the quality of data-based regional and national development planning, namely;
a. Development of a poverty alleviation planning system based on KK
b. Finalize the proposal to Bappenas, to facilitate the operation of Planning System software in real time with the proposed name being RKPINDO-ONLINE, as an information system that can assist planning in real time to realize quality and accountable development planning
c. Developing superior regional development models into national development models, namely; development oriented towards green economic growth", environmental and population development, village/sub-district based development and the development of other models throughout the Province;
4. To improve the quality of Regional Planners, it is necessary to collaborate to increase human resource development through Planning Training, Insight Development between Provincial Bappeda and training partnerships through the support of International Institutions;
5. To increase development synergy, Provincial Bappeda must increase the quality and intensity of vertical coordination with Regency/Municipal Bappeda, Inter Provincial Bappeda and encouraging increased facilitation of Bappenas in building coordination and communication with Ministries/Institutions;
6. Determining the holding of the V National Working Meeting (RAKERNAS) of the Indonesian Provincial Bappeda Association with a focus on discussing "Accelerating Indonesian tourism development" in Gorontalo Province.

(Public Relations of East Kalimantan Bappeda/Sukandar, S.Sos).