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PUBLIC WORK INFRASTRUCTURE DEVELOPMENT AND PUBLIC WORK INFRASTRUCTURE DEVELOPMENT AND INVESTMENT OPPORTUNITIES IN INDONESIAINVESTMENT OPPORTUNITIES IN INDONESIA

I. BACKGROUND

• Infrastructure development is one of the top list on the Government’s agenda. Since

physical infrastructure is the prerequisite for social and economic development. Lack

of infrastructure leads to bottlenecks and hinders economic and social activities.

• The Ministry of Public Works is responsible for the provision of Public Works

infrastructure, such as roads, irrigation, clean water, sanitation and human

settlements infrastructure

• Since financing capacity is limited to accelerate infrastructure development:

- some lending agencies, including China’s Government involved and,

- PPP has also attracted attention as an effective way.

INFRASTRUCTURE FOR ALL AS A NATIONAL PRIORITY

II. CURRENT CONDITION

Comparison of Budget Ministry of Public Works over the 2005-2009’s State Budget

Total length of road network is 376.176 km consist of among others,A.38.569 km national roads, as result of 2005-2009 development:• 86% of national road in stable condition and • 11.000 km of lane have been constructedB. Total 742 km of toll roads expressway in operation

Public Works Infrastructure Conditions for Roads (1)

• In the water resources sector, 7,2 million hectare rice fields and 1,8 million swamp rice field have been irrigated.

• About 2 Millions irrigation network under ther responsibilities of Central Government have been constructed during the last 5 years

• There are 130 reservoirs in operation, providing supply of clean water for 300 local drinking water companies (mostly under PPP Initiatives), serving pipe water to 40 % of urban population, and securing supply for 80% of urban population

• Sanitation serving 68% of population

Public Works Infrastructure Conditions for Water Resources and Human Settlement (2)

INFRASTRUCTURE FINANCING FACILITIESINFRASTRUCTURE FINANCING FACILITIES

8

Government

Land Fund (BLU & Land Capping)

Guarantee Fund (PT. PII)

PT IIF (Private Sector) & PT SMI (SOE)

Capital market and regulatory reform

Private Investors/ Lenders

Land Acquisition & ClearanceLand Acquisition & Clearance

Cost Recovery / Policy Risks

Cost Recovery / Policy Risks

Project FinancingProject Financing

PreparationPreparation BiddingBidding ConstructionConstruction OperationOperation

Cost of financing Refinancing

TOLL ROAD REFORM (1) : LAND ACQUISITION

Land Freezing

(No land transaction is allowed after toll road corridor been decided by the government)

Land Price

(Land price is determined by independent appraisal instead of using tax value of the land)

Land Title Revocation

(Land title revocation is allowed in the case of no agreement reached on land price among the parties)

Land Capping

(Government will bear the land cost above proposed land cost agreed in concession agreement)

Land Fund

(Revolving fund is provided to ease investor risk in case of delay in land acquisition)

• Proposed Law of Land Acquisition for Public Interest:

Route is determined after agreed public consultation

Land ownership is automatically revoked after route determination

Land price is determined by independent appraisal

Faster negotiation process (60 days)

Consignment is eligible if more than 51% of land is acquired

Full capacity of Land Acquisition Committee with rewards and incentives procedures

• Full and intensive coordination and socialization to stakeholders (local governments, court, police)

PRESENT CONDITION PROPOSED REFORM

Presidential Regulation (Perpres) Number 13/2010 affirms the Indonesian Government’s commitment towards PPP in infrastructure provision:

a. Land provided by the Government before tender process;

b. Government Support and Guarantee

(Land Acquisition, Construction, Permit, Fiscal Support, Tax Support, and other type of support);

c. Simplified procurement process and possibility of unsolicited projects;

d. Shareholder restructuring to strengthen the Special Purpose Vehicle (SPV).

e. Evaluation of projects’ viability and financial capability of the existing concessionaires:

1. SPV that has not signed Concession Agreement

2. SPV has signed the Concession Agreement, but have not reached Financial Close

3. SPV has signed the Concession Agreement, but the land has not been fully acquired.

TOLL ROAD REFORM (2) : REGULATORY FRAMEWORK

Signing of Official Report

Priority Formulation:1.Fulfillment of CA

stipulations2.Conformity between

priority and policy3.Unity of network system4.Availability of BLU and LC5.Land availability

Concession Evaluation

SPV Capability:1.SPV’s Financial capability

and performance 2.Credit agreement with

creditor

Project Viability:1.Availability of BLU and LC2.Adjusted schedule of land

acquisition and construction3.Adjusted investment cost4.Revenue projection

1.Increased liquidity and decreased solvability

2.Free cashflow accumulation bigger than equity needs

3.Equity fund fulfillment by SPV

4.Willingness of creditor to provide loan

FIRR ≥ interest rate of Govt owned banks+3%

Group A(continues)

Group B(needs support)

Group C(discontinues)

Support not provided

Support provided

Yes

No

Continuing concession based on the agreement

Gap of development between the island of Madura with other regions in East Java Province,

particularly in Gerbangkertosusila

DEVELOPMENT LEVEL MADURA

REGION IS RELATIVELY

LOWER

Insufficient access to and from the island of Madura

BACKGROUND

CHINA- INDONESIA COOPERATION: SURAMADU BRIDGE (COMPLETED IN 2009)

CHINA- INDONESIA COOPERATION: SURAMADU BRIDGE (2)

CHINA- INDONESIA COOPERATION: JATIGEDE DAM (UNDER CONSTRUCTION)

Background

1. The Jatigede dam, in Sumedang, West Java, is being built as the answer to flooding and drought problems in the northern lowlands of West Java. The government claims it will provide 90,000 hectares of farmland with irrigated water, increase the rice harvest as well as generate electricity for industry and supply clean drinking water for residents.

2. Jatigede dam construction’s contract was signed in April 2007 between the Government of Indonesia and China Sinohydro Coop Ltd. contractor with a contract value of Rp 2.2 trillion (239.5 million U.S. dollars). It is expected to be completed in 2014.

III. DIRECTION FOR PUBLIC WORKS INFRASTRUCTURE DEVELOPMENT IN 2010-2014

Newly Developing RegionDeveloped Region Developing Region

The development of public works infrastructure in Indonesia adopts the regional development approach “infrastructure for all” and “sustainable development.”

REGIONAL APPROACH IN INFRASTRUCTURE DEVELOPMENT

USER PAYMENT GOVERNMENT SUBSIDYFULL GOVERNMENT

FINANCING

DEVELOPEMNT PUBLIC WORKS INFRASTRUCTURE’S PHILOSOPHY

DEVELOP SPATIAL STRUCTURE AND ITS PATTERN

SUPPORT LOCAL AND REGIONAL DEVELOPMENT

REFER TO SPATIAL PLANNING

ROADS

WATER RESOURCES

HuMAN

SETTLEMENT

O T H E R S

SOCIAL & POLITICAL ENVIRONMENTAL

•Efficient Provision of Infrastructure•Proper Coordination between sector, economy & social activities

STRATEGIC DIRECTION TO THE PUBLIC WORKS INFRASTRUCTURE DEVELOPMENT

1. Qto develop quality infrastructure to increase the attractiveness and competitiveness of Indonesia in the world.

2. To develop infrastructure to reduce the social-economic gap among Indonesia

• between western and eastern regions of Indonesia.• between Java and other islands.• between urban and rural areas 3. To increase funding to develop Public Works infrastructure through :

government budget (including assistance from lending agencies) and enhancing PPP for infrastructure.

Public Works Infrastructure

YEAR OF IMPLEMENTATION

2005-2010 2010-2015 2015-2020 2020-2025

Road Infrastructure Strengthening the principle policy for investment

Network Development

Reliable and efficient service

Reliable network

Water Resources Strengthening the principle policy for investment

Network Development

Servicebility of sustainable water resources

integrated water resources network of across sectors

Human Settlement Infrastructure

Strengthening the principle policy for investment

Network Development

• Fulfill the need of drinking water as a basic needs

• Fulfilling the needs of housing with supporting infrastructure and facilities

Fulfill the need of housing including facility and infrastructure

The Infrastructure Development Stages for Public Works Infrastructure

PUBLIC WORKS INFRASRTUCTURE FINANCING PLAN PUBLIC WORKS INFRASRTUCTURE FINANCING PLAN FOR 2010-2014 FOR 2010-2014

Road DevelopmentRp.148.5 0 T

US$16,5 billion

SettlementInfrastructure

Rp.50 TUS$4,2 billion

OthersInfrastructure

Rp.10.40TUS$1.12 billion

WATER RESOURCES DEVELOPMENT PLANFOR YEAR 2010-2014

Banda Aceh

Medan

Pekanbaru

Padang

Jambi

BengkuluPalembang

Tanjung Pinang

Jakarta

BandungSemarang

YogyakartaSurabaya

Pontianak

Palangkaraya

Banjarmasin

Samarinda

Makassar

Kendari

Mamuju

Palu

Gorontalo

Manado

Mataram

Kupang

Ambon

Ternate

Sorong

Accomplishment ofEast flood Canal Jakarta

Accomplishment of flood control infrastructure development and integrated Development of Bengawsan Solo river stream

Development of water resourcesinfrastructure to provide Agricultural production centre

BandarLampung

Serang

Biak

Jayapura

Denpasar

Trunk

Island Trunk Road 2.390 KM

Papua IsslandTrunk Road 1,974 km

Sulawesi IslandTrunk Road 4.510 km

Kalimantan IslandTrunk Road 4.510 km

Sumatra IslandTrunk Road 4,627 km

TRUNK ROAD DEVELOPMENT PLAN FOR YEAR 2010-2014

HUMAN SETTLEMENT DEVELOPMENT PLAN FOR YEAR 2010-2014

INFRASTRUCTURE PROJECTS IN THE PROCESS TO BE FINANCED BY THE CHINESE GOVERNMENT

DataDataMedan-Kualanamu Medan-Kualanamu

Toll RoadToll RoadCileunyi-Sumedang-Cileunyi-Sumedang-Dawuan Toll RoadDawuan Toll Road Tayan BridgeTayan Bridge Kendari BridgeKendari Bridge

Map

Location North Sumatera West Java West Kalimantan South East Sulawesi

Length (km) 27.5 60.10 1.42 0.87

Construction Cost (Rp. Bill) 1.500 5.100 898 617

Land Acquisition Cost(Rp. Bill) 750 536.8 11.5 9.78

Land Acquistion Progress 0.83 % 14.17 % N/A N/A

EIRR 22 % 23.32 % 12.56 % 32.46 %

FIRR 14.4 % 14.1 % N/A N/A

Status

Blue Book 2008: USD 137 Million

AMDAL (2005) FS (2005) Review FS (2006) DED (2009)

Blue Book 2008: USD 100 Million

AMDAL (2004) Pra-FS (2004) FS (2005) DED (2009)

Blue Book 2008: USD 67 Million

FS (2004) DED (2008)

Blue Book 2008: USD 60 Million

FS (2006) Basic Design (2006)

CILEUNYI-SUMEDANG-DAWUANCILEUNYI-SUMEDANG-DAWUAN

Sei Tayan Bridge

OTHER INFRASTRUCTURE PROJECTS BEING CONSIDERED TO BE FINANCED BY CHINESE GOVERNMENT

1. Jambo Aye Multi Purpose Reservoir Project Aceh

2. Musi Bridge III Construction Project3. Pekanbaru - Kandis - Dumai

Toll Road Dev. Project4. Bakauheni - Terbanggi Besar

Toll Road DevProject

1. Construction of Gondang, Kendang, Pidekso Dam, Central Java2.Construction of Kresek and Kedung Bendo Dam, East Java3. Greater Bandung Water Supply and Sanitation Project, west Java4. Jatiluhur’s Water Supply and Development System, West Java5. Umbulan’s Water Supply and Development System, East Java 

Construction of Tanju and Mila Dam, West Nusa Tenggara

 

1. Raw Water Supply in Pontianak City2. Construction of Pasir Panajam Bridge, East Kalimantan

 Construction of Arterial Road to Support Belang-Belang International Port, West Sulawesi 

PPP’S Inititives: Public Works Investment’s Opportunity

Ministry of Public Works

No Project QuantityEstimated Investment Value

(US $ million)

1 Toll Road 18 7,591.51

2 Water Supply 6 521.87

3 Solid Waste and Sanitation 3 220.00

T O T A L 27 8,333.44

No Project QuantityEstimated Investment Value

(US $ million)

1 Toll Road 17 19,261.33

2 Water Supply 18 1,327.50

3 Solid Waste and Sanitation 3 57.27

T O T A L

Priority Projects

Potential Projects

TRANS SUMATERA TOLL ROAD

o Sumatra Island currently served by three main trunk roads: (i) East Coast Trunk Road, (ii) Middle Trunk Road and (iii) West Coast Trunk Road

o Trans Sumatera Expressway from Bakauheni to Banda Aceh is to be developed in east corridor: is part of ASIAN and ASEAN highway network, has better geological condition, serves more traffic around 20.000-40.000 veh/day and around 18 million of people and connects 7 national activity centers, 6 ports, 5 airports and railway network (Bandar Lampung – Palembang).

o Trans Sumatera Expressway is to be the “backbone” to improve access and connection between each area along the way.

CorridorLength Feasibility Parameter

Km B/CNPV

(Bill Rp)IRR(%)

Main Corridor

Lampung-Palembang 358 1,32 5,316 16,69

Palembang-Pekanbaru 610 0,89 -3,154 12,9

Pekanbaru-Medan 548 1,02 543 15,62

Medan-Banda Aceh 460 0,66 -8,593 9,05

SUB TOTAL 1976

ConnectingCorridor

Palembang-Bengkulu 303 0,53 -10,958 8,87

Pekanbaru-Padang 242 0,67 -8,419 9,78

Medan-Sibolga 175 0,42 -10,528 6,77

SUB TOTAL 720

GRAND TOTAL 2696

IMPLEMENTATION PLANPhase 1: 2015-2019 Phase 2: 2020-2024Phase 3: 2025-2029

IMPLEMENTATION PLANPhase 1: 2015-2019 Phase 2: 2020-2024Phase 3: 2025-2029

ACTION PLAN FOR TRANS SUMATERA TOLL ROADACTION PLAN FOR TRANS SUMATERA TOLL ROADo Law Amendment regarding Land Acquisition for Public

Interesto Securing land before construction by government o Soft loan from multilateral and bilateral agencyo DBO/L concept or other type of PPP scheme such as

hybrid constructiono Institution and special account for Trans Sumatera

Expressway developmento Planning and construction coordination between

stakeholders o Further detailed study involving international organization

experience

Cross Section

6

2

3

5

11

Length(km)

199

LA Cost(Rp. BIll)

7.009

TOTAL

Investment Cost(Rp. BIll)

32.338

LA(Rp. Bill)

1.123

Land Capping(Rp. Bill)

-

Construction(Rp. Bill)

7.042

Government Support

-

1.1231.108

89980

1067.042*)

2.3631.8471.577

-1.123---

-----

-7.042---

1. JORR Seksi W-2 Utara 7

2. Akses Tanjung Priok17

3. Cengkareng-Batu Ceper–Kunciran15

4. Kunciran - Serpong11

5. Bogor Ring Road11

Operated up to 2009

Government

PPP

Enterprise

LEGEND:

*) Construction Cost

JABODETABEK TOLL ROAD

TRANS JAVA TOLL ROAD(2010-2014)

Bandung

Jawa Barat

JakartaSerang

Surabaya

Yogyakarta

Semarang

DKI

Banten

DIY

Jawa Tengah

Jawa Timur

Kertosono

Mojokerto

PejaganPemalang

Batang

Cikampek

Palimanan

Solo

Ngawi

Pasuruan

Probolinggo

Banyuwangi

Kanci

Sukabumi

Ciranjang Demak

Malang

Pandaan

Gempol

Bogor

323 KM 179 KM 78 KM

(K)

9 MAIN TPRIORITY FOR TOLL ROAD NETWOKS654 KM

76 KM

Operation till 2009

Gov’t

PPP

BUJT

length(km)

169

-

179

440

788

Land cost(Rp. M)

-

-

1.367

3.020

4.387TOTAL

Investment cost(Rp. M)

-

-

8.336

26.369

34.705

Tanah(Rp. M)

-

-

1.367

-

1.367

Land Capping(Rp. M)

-

-

-

1.301

1.301

Construktion(Rp. M)

-

-

2.918

-

2.918

Goverment support

*)Kanci-Pejagan telah beroperasi tahun 2010

Potongan Melintang

1

2

43

657 8

9

KETERANGAN :

1. Cikopo-Palimanan : 116 km2. Pejagan-Pemalang : 58 km3. Pemalang-Batang : 39 km4. Batang-Semarang : 75 km5. Semarang-Solo : 76 km6. Solo-Ngawi : 90 km7. Ngawi-Kertosono : 89 km8. Kertosono-Mojokerto : 41 km9. Mojokerto-Surabaya : 37 km

MEGA BRIDGE CROSSING THE SUNDA STRAIT

oTwo trenches and fault along the Sunda Strait

oRequired + 2.5 km spanoPossibility of tsunami around 5 m at

Sangiang island within 1 hour and existance of Krakatau Mountain (Active volcano)

oClearence height for the International Sea Transportation Route and highest cargo ship Maersk Line (76.5 m)

oAbrasion at Anyer and Bakaheuni coastals + 4 m per year

oWave height 2.41 m for 1 year return period and 4.01 m for 50 year return period

oConservation area at Sangiang island and coastal around the Banten and Lampung

oBridge should be connected to the planned/existing freeway network

ALTERNATIVE FIXED CROSSING FACILITY BETWEEN JAVA - SUMATERA

Description Existing Ferry System

Nusantara Tunnel *) Sunda Strait Bridge

Invenstment Cost - US $ 3 – 4 Billion US $ 17 – 24 Billion

Implementation Limited capacity Difficult to apply due the trench and fault

Long Bridge

Capacity 2.5 Million Vehicle/year13 Million Pass./year

Single Track :•6 Million Vehicle/year•30 Million Pass./yearDouble Track :•12 Million Vehicle/year

•60 Million Pass./year

48 Million Vehicle/year**)

240 Million Pass./year

Travelling Time Min. 120 Minutes ±30 Minutes ±25 Minutes

Loading/ Unloading Time

±60 Minutes ±30 Minutes -

Waiting Time ± 60 Minutes ~ 4 Hours(in some case 24 hours)

±30 Minutes ~ 60 Minutes

-

Transportation Mode

Roll on Roll off Ships Roll on Roll offElectric Car Train

Car / Bus / Truck and possibly combined with Train

Toll Fee (Class I) US$ 8.5 (Car + 5 Pass.)

US$ 20 (Car + 5 Pass.) US$ 30 (Car + 5 Pass.)*) Data from PT. Nusantara Tunnel Indonesia (NUSTI) www.nusantaratunnel.co.id**) Assumption capacity for one-lane is 2200veh/day within 10 hours

1. The importance of infrastructure development in Indonesia will continue to grow, reflected by significantly higher government budget allocation.

2. The Government of Indonesia is strongly committed to create conducive public works infrastructure investment climate through Continuous reforms in regulatory framework and land acquisition;

3. Investment opportunity available for new projects as well as strategic partnerships (PPP) with the existing investor/concessionaire and/or participation in the next investment tender;

4. The government of China has supported the public works development through concessional loan with the involvement of Chinese contractors in cooperation with Indonesian Contractors. These cooperation are expected to continue to grow. It is expected as well as that private sectors from China will involve in PPP’s in Indonesia

Fund, professionalism, and efficiency from the private sector

CONCLUDING REMARK

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THANK YOUTHANK YOU

MINISTRY OF PUBLIC WORKS