PPP CENTRAL UNIT: GLOBAL NETWORK

1. PPP CENTRAL UNIT: GLOBAL NETWORK Challenges to Make Public-Private Partnerships Work By BastaryPandjiIndra Director for Public-Private Partnership Development National Development Planning Agency (BAPPENAS) - Indonesia III ASTANA ECONOMIC FORUM , Astana , 1-2 July 2010

2. Indonesia Robust Macroeconomic Outlook • Economy grew 4.4% in 2009 compared to 6.1% in 2008. Government target average annual growth at 7% during 2010-2014; • Target predicated especially in infrastructure sector as it is a key element in Indonesia’s medium term development plan 2010-2014; • 7% growth target requires about US$ 1.1 trillion of investments during 2010-2014, meanwhile Government budget can only cover 20-30% of total investment; • Standard & Poor’s raised Indonesia’s sovereign credit rating to BB from BB- on 12 March 2010, with a positive outlook. S&P and Moody’s Investors Service both rank Indonesia two levels below investment grade, while Fitch Ratings on 25 January 2010 raised its rating to one step below investment.

3. Indonesia Institutional Framework in PPP Implementation to Generate “Bankable” Projects Donor CMEA • Foreign loan for portion of infrastructure • Grant for study • Backstop fund Policy improvement and coordiantion support BAPPENAS P3CU Budgeting for government support; e.g. land, vertical split, horizontal split, • Priority commitment(*1) Multi-stakeholder alignment PROJECT POOL • Direct support commitment(*3) PDF • GCA commitment(*2) • Guarantee commitment(*4) Government Contracting Agency (GCA) PPP node IIGF MOF/RMU • Recourse commitment(*5) Market Sounding Unsolicited Projects • Technical consultants by sector • PPP consultants Preliminary financial structuring Financier Private Investors Consultants *1: Support for budgeting, preferencial PDF fee *2: GCA’s responsibilities such as land procurement, licensing *3: Tax incentives, funding for public portion *4: Compulsory guarantee menu defined by sector plus add-on guarantee negotiated by project *5: GCA’s share of risk such as regulatory risk CMEA: Coordinating Ministry of Economic Affairs

4. PPP Challenges in Indonesia: Institution Champion • 1 MoF/RMU CMEA Sectoral Department One Stop Window Management Power/Authority PPP Center Unit Bappenas Local Government Guarantee Fund Infrastructure Fund Land Agency GCA • Multi Institutions • 2 • Decentralized PPP Implementation • PPP Nodes establishment and strengthening • Leads to • Project Bundling • Incremental and Small Scale PPP Project • Regional Approach • PPP development authority is spread into many institutions, moreover P3CU is not yet officially established. • PPP needs a “champion” in streamlining PPP Process (Project identification, preparation, transaction, land acquisition and government support). Thus, P3CU needs to be equipped with more power/authority. • Apply single window management. 4

5. PPP Challenges in Indonesia: Fund Lack of Fund to support PPP projects Association of World PPP Center • Land provision • Establishment of a Land Fund for PPP projects • Government Guarantee PDF Revolving Fund Pool of Fund • Government Support World/Regional Infrastructure Fund • Project Development Facility Other Donors • Projected total investment in the next 5 years: • US$ 47,298.93 Million (100 Projects) requires US$ 946 Million, while available PDF Fund is US$ 38 Million (0.04% of the needs). 5

6. PPP Challenges in Indonesia: Capacity Building Private • ISSUES • Public Institution • Profit Oriented • Decentralized PPP implementation • Public Service Oriented • High Standard in securing investment • Incremental and Small Scale PPP Project Good governance in PPP process • Provision of design, construction, financing, operation, and management • Insufficient institutional capacity Regulation and Policy setting Project Preparation • Lack of coordination Standardized/acceptable PPP process for both public and private party Knowledge and Information Center Establishing a common understanding of “Bankable” Project Regular Investment Forum • Improve Private and Public communication Association of World PPP Center 6

7. Jakarta Declaration 2010: Consideration for Association of World PPP Center Establishment • Lack of capacity to develop PPPs is a regional phenomenon. Jakarta Declaration was signed on 17 April 2010 at the Asia-Pacific Ministerial Conference; • Calls for greater regional cooperation, especially in capacity building and infrastructure financing. • Jakarta Declaration is being converted into a resolution for ratification by the United Nations; • Recommending The UN to take the lead to develop the means for regional cooperation through a Task Force. • However, the Asia-Pacific region needs to work with the Task Force to develop a system of mutual self help; • Cooperation could cover a knowledge-exchange program, technical support between member countries, and a regional infrastructure fund. 7

8. Concluding Remarks • Government of Indonesia (GoI) are welcoming international cooperation in supporting PPP development. We do think Association of World PPP Center will greatly helpful in enhancing each member capacity and accelerating lesson learned, whilst broaden PPP market in the region as well as attractiveness to global financiers. • A proper scheme of world/regional cooperation between PPP Center should help the members in overcoming barriers in PPP development and not to increase the cost of PPP project development/transaction. • Proposed area of cooperation: • Development of financial cooperation for project development facility and infrastructure fund; • Integrated information system; • Knowledge sharing and technical support exchange; • Building best practices as well as consensus among countries in providing fair respective government supports and assessment of fiscal risk. • We do need to assure that any PPP Projects adopt good governance principles. Association of World PPP Center shall play the role encouraging the implementation of this principle whilst still respecting each member authority.

9. T H A N K Y O U