Indonesian Infrastructure Development and the role of KPPIP

Triharyo (Hengki) SoesiloProject Director for Energy Sector

Committee for Acceleration of Priority Infrastructure DeliveryCoordinating Ministry for Economic Affairs

Development Planning Target to achieve economic growth of 6-­7% p.a. in 2015-­2019

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Enggano

Kertajati

Singkawang

MuaraTeweh

Miangas

Maratua

Tojo Una-­‐Una

Pohuwato

Moa

Namniwel

Taria

Kenyam

Aboy

Sultan Hassanuddin

Banda Aceh

Belawan

Kuala Tanjung

Dumai

Batam

PangkalPinang

Pontianak

Panjang

Padang

Tj. Priok

Cilacap

Tj. Perak

Lombok

Kupang

Palangkaraya Banjarmasin

Makassar

Maloy

Bitung

Halmahera

SorongJayapura

Merauke

Ambon

KorowayBatu

Sea toll concept as a means to support Indonesia in becoming the world maritime axis. • develop 24 new seaports • increase number of substantial vessels (pioneer cargo, transport vessels, pioneer crossing vessels)

• develop 60 crossing ports

Strengthen connectivity through air transport infrastructure development• develop 15 new airports• develop air cargo facilities in 6 locations

• increase number of pioneer airplanes

Improve transport efficiency by road development and maintenance• develop 2,650 km of new roads • develop 1,000 km of new toll roads• rehabilitate 46,770 km of existing road

Reduce logistic cost by improving railway infrastructure develop new tracks in Java, Sumatra, Sulawesi, and Kalimantan:§ 2,159 km inter-­urban railways§ 1,099 km urban railways

Develop urban transport• develop Bus Rapid Transit (BRT) in 29 cities

• develop Mass Rapid Transit (MRT) in 6 metropolis and 17 large cities.

Achieve electrification ratio of 96.6% by 2019 through generating capacity improvement • develop power plants with total capacity of 35,000 MW

Ensure efficiency of fuel productionby optimizing domestic refineries• build new oil refineries of 2x300,000 barrels

• Expand existing refineries in Cilacap and Balongan

Energy RelatedEnergy Related

Logistic RelatedLogistic Related

Location of 24 new seaports & 15 new airports

Source: Bappenas

Achieving food sovereignty through irrigation system improvement• develop 33 new dams and 30 hydropower plants

• expand 1 million ha irrigation system • rehabilitate existing irrigation system

Plan and Reality

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Budget/Funding mechanismBudget/Funding mechanism

Human ResourcesHuman Resources

Environmental assessment process

Environmental assessment process

Location PermitsLocation Permits

Government Supports and Guarantees

Government Supports and Guarantees

Spatial PlanningSpatial Planning

Forestry Permits processForestry Permits process

Overlapping RegulationsOverlapping Regulations

Procurement ProcessProcurement Process

3,000 ft3,000 ft

3 ft3 ft

High level High level

On the ground realitiesOn the ground realities

Coordination and commitmentCoordination and commitment

Political Decision, Groundbreaking

Implementation

BIG DISCONNECTION

Need intensive debottlenecks for

comprehensive problems solving, periodic MONEV,

and clear Action Plan

Infrastructure Financing Sources, 2015-­2019(Based on National Development Planning Ministry Exercise)

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National and Regional Budgets

Financing Gap

SOEs ~ 22.23%~ 106.7 US$

~ 175.1 bill US$

NOTES:1) Hypothetical number, not for quotation. Official number of needs only include budget ceiling for National and Regional Budgets as approved by Ministry of Finance on January 2015

2) Portion of National Budgets based on agreed budget ceiling by the Ministry of Finance as proposed by the National Development Planning Ministry

3) All estimates only based on the large investment and rehabilitation projects, e.g., not calculating the operational costs in detail.

Total Need of Strategic

Infrastructure Investment1)

(480 bill US$) 3)Private Investment (PPPs, Off Balance

Sheet,Loan, Obligations, etc ~ 36.52%)

National Gov’t Budgets ~ 29.88%2)

~ 143.3 bill US$

Regional Gov’t Budgets ~ 11.37%

~ 54.5 bill US$

FOREX Assumption is based on conversion rate of IDR 10,000 per US$

Alternative Financing Schemes

Reformed Actions by the Government to Accelerate the Delivery of Infrastructure Projects

Fiscal reforms Institutional reforms Regulatory reforms

Supported by improving awareness of Indonesian infrastructure issues, convergent reforms are building a better business environment for tomorrow’s investment

Supported by improving awareness of Indonesian infrastructure issues, convergent reforms are building a better business environment for tomorrow’s investment

• Investing in Indonesian infra-­structure has been regarded as risky with uncertain returns on investment.

• Indonesia did not have any fiscal mechanisms that could support the development of infrastructure investment

• Indonesia suffered a lack of leadership to implement the changes needed for the infrastructure sector to grow

• Regulatory reforms are the backbone of long-­term structural change. Indone-­sian regulatory corpus has been characterized by some ambiguities and conflicting regulation

Indonesia now has fiscal supports to improve project

attractiveness, such as VGF and Availability Payment. It has also established land revolving fund to improve risk-­sharing scheme.

Establishment of KPPIP(Committee for Acceleration of Priority Infrastructure Delivery) and empowerment of existing institutions (PT. SMI and IIGF) to fill in the gap in enhancing project bankability. Ministry of Finance has established PPP Unit to

provide PDF and TA.

The GoI has ratified the revised regulations related to PPP,

Availability Payment, Direct Lending and land acquisition. Moreover, policy deregulations have been included as

one of the main aspects of the Economic Policy Packages.

issues

Reforms

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Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

KPPIP was established to revitalize KKPPI1 functions by downsizing the organizational structure, authorizing synergized decision makings and involvement since the project preparation stage, and strengthening capacity building in internal committee.

KPPIP members include ministries and institutions that play significant roles in project preparation

Coordinating Ministry of Economic Affairs

Ministry of Finance

Ministry of National Development Planning/Bappenas

Ministry of Agrarian and Spatial Planning (BPN)

Coordinating Ministry of Maritime Affairs2

Ministry of Environment & Forestry 2

1 KKPPI or Komite Kebijakan Percepatan Penyediaan Infrastruktur, in English called Committee for Acceleration of Policy and Infrastructure Provision was the committee prior to the revitalization of KPPIP2 Proposed revision of Presidential Reg. 75/2014;;3OBC: Outline Business Case;; 4PDF: Project Development Fund

In carrying out its mandates, KPPIP strengthens its internal synergy by dividing the work and preventing duplication efforts so that efficient and effective infrastructure delivery can be achieved

Examples of line Ministries/Institutions involvement based on each line Ministry/Institution mandates:

o Assessing and providing OBC facility for bottom-­up projectso Developing Pre-­Feasibility standard and quality guidelines

o Debottlenecking on issues related to land acquisition and supporting acceleration efforts

o Providing OBC3 facility for top-­down projectso Monitoring and debottlenecking of projects on economic issues

o Reviewing and approving Government support and guaranteeo Providing PDF4 facility for PPP projects

EKON

• KPPIP involves other line Ministries/Institutions in infrastructure sector (economy or social) when making decision.

• KPPIP has established the Electricity Team (UP3KN) and the• Development of Bontang Oil Refinery Acceleration Team. • Land Acquisition Acceleration Team etc.

Existing Mem

bers

Proposed

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KPPIP Mandates

Top down projects (from

President/Vice President)*

Bottom Up Projects(Proposed by Line Ministries and Regional Govt)

* OBC (Outline Business Case) is the output of pre-­feasibility study. FBC (Final Business Case) is the output of feasibility study.** Project owner is the ministry, agency head, regional heads, SOE/ROE heads established as the responsible party in priority infrastructure delivery.

3. Determination of funding scheme &

source for priority projects

State Budget

SOE appointment

PPP/Strategic Funding

Coordinate between the project owner** and Bappenas related to funding source (State Budget, Regional Budget, ODA)

SOE appointment aims to accelerate implementation and leverage SOE financial capacity.

PPP Unit at MoF to coordinate FBC* development and do transaction advisory to implement PPP projects(involving internationally reputable consultant).

2. Determination of Priority Projects

4. Monitoring &DebottleneckingKPPIP assists development of Action Plans and

monitor debottlenecking

efforts

KPPIP’s six main tasks as stipulated in Pres. Reg. No. 75/2014

5. Determine strategy and policy6. Facilitate capacity and institutional building related to Priority Infrastructure delivery

1. Development of pre-­feasibility study (OBC*) quality

standard and revise/re-­do when necessary (3-­

6 months)

Groundbreaking

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Additional mandate for National Strategic Project: Monitoring and Evaluation including debottlenecking high level issues.

Coordinating Ministry of Economic Affairs decree no 12/2015 which listed Priority Projects for KPPIP

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Strategic ProjectsPriority Project

s

Medium term Projects

RoadsRailways

Water &

Sanita-tion

Energy

Electri-city Ports Airpor

ts ICT

4 5 3 3 9 4 1 1

Priority Projects

Roads Railways Airports Ports Housing Energy

52 19 17 13 3 7

Strategic Projects

Water & Sanitati

on

BorderDevelopm

entDams Technolo

gy Estates Mining

10 7 60 3 25 6Agrarian & Fisheries Electricity3 1 Program

List of Priority Projects to become a focus of 2015-­2019

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4

4

4 4

38

56131213 18 21

11

1

25

92

7

6

6

10

4

4

26

4

42715

30

23

16

29

1219

29

29

2929

29

29

29

29

29

4

4

8

14

19

20

22

24

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1. Balikpapan-­Samarinda Toll Road2. Mando-­Bitung Toll Road3. Panimbang Serang Toll Road4. Trans Sumatera Toll Road (8 sections)5. SHIA Express Railway6. MRT Jakarta South – North Line7. Makassar – Parepare Railway8. Kuala Tanjung International Port Hub9. Bitung International Port Hub10. Karangkates IV & V (2x50MW) HEPP

11. Kesamben (37MW) HEPP12. Lodoyo (10MW) HEPP13. Inland Waterways/Cikarang – Bekasi – Laut (CBL) 14. Light Rail Transit (LRT) South Sumatera15. Integrated Light Rail Transit (LRT) within Jakarta,

Bogor, Depok and Bekasi16. National Capital Integrated Coastal Development

(NCICD) Fase A17. Jakarta Sewerage System18. West Semarang Water Supply19. High Voltage Direct Current (HVDC) 20. Sumatera 500 kV Transmission Line

21. Central – West Java Transmission Line 500 kV22. Central Java Power Plant (CJPP)/Batang Power

Plant23. Indramayu Power Plant24. Mine to Mouth Power Plant Sumatera Selatan 8,

9, 1025. Bontang Refinery26. RDMP (Balikpapan, Cilacap, Balongan, Dumai,

Plaju)27. New Port Development in West Java (North Part)28. Tuban Refinery29. Palapa Ring Broadband30. East Kalimantan Railway

Difference in National Strategic Projects and Priority Projects – KPPIP role

Priority Projects

KPPIP to provide knowledge sharing on the project preparation and debottlenecking activities.

KPPIP will provide monitoring and evaluation on the project and also perform debottlenecking on key strategic issues.

KPPIP is actively involve in the whole project life cycle from the project preparation up to operational and maintenance. The project will receive additional facilities from KPPIP during the project implementation.

KPPIP role