Outside the Indonesian box
“The timelines published by the Indonesian government are somewhat ambitious,” says Catie Burdett of Australia-based lawyers Middletons. “But the government has fast-tracked four projects for next year, which offer real potential and a greater degree of comfort for private financiers.”
Recently, the Indonesian government made legislative changes recognising the issues private financiers face with sovereign risk and established the Indonesian Infrastructure Guarantee Fund. As the country aims to paint a prettier picture to the outside world, the guarantee fund will look to provide a stable investment environment to the private sector.
The first of these fast-tracked PPPs is a water supply project in West Semarang, where the Indonesian Regional Water Utility Company is due to launch a request for proposals (RFP) early next year. With an eye on completion by mid-2014, the project will see 2.2km of raw water pipeline in addition to the existing 15km operated by the state. Valued at $80m, the project will be tendered under the country’s build, operate and transfer model, as outlined by Indonesia’s Ministry of Finance.
Secondly, the $1.4bn Karama Hydro Power Project in the West Sulawesi Province is the country’s first established PPP in hydropower. With a growing demand for consistent electricity, the government has marked this down as a critical PPP venture, with an RFP due in January. According to the State Electricity Corporation, transaction advisers completed feasibility studies earlier this year, with pre-qualified bidders identified in November.
Valued at $1.1bn and considered the centrepiece of its PPP pipeline, Indonesia’s Manggarai – Soekarno Hatta Railway Project in Jakarta City will connect Manggarai Station with the Soekarno Hatta International airport, one of the country’s busiest transport hubs. After completing feasibility studies, officials of the Ministry of Railways Traffic and Transport are currently mulling five track options. Once this is deduced, the tender is due in the first quarter of 2013.
The final billion-dollar project which has been shortlisted for fast-tracking is West Java’s toll road PPP. Connecting the cities of Cileunyi, Sumedang and Dawuan, the project is due to launch late next year.
Whether the government’s pipeline appears overly ambitious, there is no doubting the potential investment they bring to the private sector. Long-term contracts mixed with billion-dollar figures offers real potential for foreign companies looking to dip into emerging markets. With a government looking to immediately address its infrastructure deficit, the opportunities are there for many to be involved in the expansion and upgrading of Indonesia’s internal infrastructure requirements.