The National Development Planning Board of Indonesia noted that the government is seeking to attract IND440trn (US$48.8bn) in private capital for 100 projects in transport and utilities infrastructure to be implemented as public private partnerships (PPPs) between 2010 and 2014. Infrastructure industry value will register strong growth between 2010 and 2014; however, this will mainly be on the back of government spending on infrastructure, rather than private procurement.

The National Development Planning Board made the comment in light of the upcoming Asia Pacific Ministerial Conference on PPPs, which will be held in Jakarta between April 14 and April 17 2010. Indonesia's government led by President Susilo Bambang Yudhoyono, has pledged to make infrastructure a priority and PPPs are increasingly taking centre stage in efforts to meet that pledge. According to a report by the Jakarta Post, a new guidebook on PPPs in Indonesia will be issued during the conference to attract investors. Projects that will be procured using a PPP model include: 18 toll roads, nine water infrastructure projects, 12 port projects, seven air-transport projects, nine railway projects and five power plant projects, according to the same newspaper report.

PPPs are relatively new in Indonesia and the government has been making efforts to iron out problems in the legal, regulatory and institutional framework governing the sector. In November 2009 for instance, President Yudhoyono ordered an audit of the regulatory framework covering PPPs and public procurement processes for infrastructure projects. The aim of the audit was to accelerate the planning processes for new projects.

Public Sector Procurement Will Propel Growth

Indonesia's Infrastructure Industry Value Forecasts

f=forecast. Source: Statistics Indonesia, BMI

We maintain our doubts as to the viability of PPPs in Indonesia given the current limitations of the investment climate. Though our forecasts indicate that Indonesia will be one of the largest infrastructure markets in the coming years globally and will exhibit robust growth, we anticipate that the government and government-affiliated entities will largely be responsible for investments. Expectations that the private sector will also invest in infrastructure have been taken into account in our forecasts, though they do not provide the main support mechanism for growth. Issues such as very high levels of corruption, low absorption capacity and the heavy bureaucratic edifice are pertinent obstacles to the implementation of PPPs in the country in the scale that the government is hoping for.