3 2 STEVEN TABOR ADB
Delivering Infrastructure
Hotel Grand Hya-, Nusa Dua - Bali
10-11 December 2015
Presented by:
Steven Tabor
COUNTRY DIRECTOR
ASIAN DEVELOPMENT BANK – INDONESIA RESIDENT MISSION
Infrastructure for what?
To support new sources of growth
To foster more equitable development
To enable more sustainable development
To prepare for growing urbanizaUon
To tackle criUcal bo-lenecks and high costs
To address 15 years of under-investment and the
O&M neglect habit
• Social overhead capital: Austerity’s legacy
•
•
•
•
•
•
Why Infrastructure Investment is
Important…
• Key for higher and sustained economic growth necessary for poverty
reducUon and welfare improvement.
• Infrastructure development is necessary to:
• Maintain high, inclusive, and sustainable growth
• Meet the challenges of massive
• Achieve higher level of regional economic cooperaUon
• Infrastructure connecUvity reduces economic distance and increases
density and scale of economic acUvity.
• It improves producUvity and efficiency by:
• CreaUng greater opportuniUes for market access by reducing costs of
trade and physical movement
• SUmulaUng consumpUon through be-er delivery of goods and services
• Scaling up benefits when more countries are connected
Key CharacterisBcs of Infrastructure
Public Good
• ExternaliUes
• Non-excludability/free riders
• Poverty and other posiUve impacts
Long Horizon
• Need for long term financing
• PoliUcal risk/risk sharing
Bulky Investment
Infra-Industry Nexus
4
• Large investments by powerful agents
• Possible market dominance/regulatory
capture
• Dynamic of comparaUve advantage
• SubsUtute/complement for factors of
producUon
• Generate spaUal effects
Insufficient Infrastructure Spending in
Many ASEAN Countries
Infrastructure Needs vs Spending—ASEAN Economies
Country
EsBmated
Infra Needs
(2010-2020)
USD Billion
Needs as % of Infra Spend Infra Spend
EsBmated GDP as % of GDP as % of GDP
(Annual,
(1980-2009) (2012)
2010-2020)
Indonesia
450.0
6.2
7.0
2.7
Malaysia
188.1
6.7
6.0
3.5
Philippines
127.0
6.1
2.0
2.2
Thailand
173.0
4.9
4.0
2.0
Viet Nam
110.0
8.1
12.8
(for 2009)
9.2
Cambodia;
Lao PDR;
Myanmar
46.5
9.5
N.A.
~4.0
Source: Bha-acharyay, Kawai, Nag (2012); ADB staff esUmates.
Indonesia: Addressing Infra Gap
• 2015-2019 RPJM
• Major infra
investments in
transport and
electricity
• Public sector: 70%
of total infra
investments
• Public infra
investments to
rise from 4.2% of
GDP in 2015 to
6.2% of GDP in
2019
2015-2019 National Medium Term Development Plan,
Infrastructure Investments by Funding Source
$170 bn
40%
$130 bn
30%
$82 bn
20%
National Gov't
$42 bn
10%
Sub-national gov'ts
SOEs
Private sector
Delivery Targets Are Enormous
RPJM --- $480 billion with 30% expected to be financed by the private sector through PPPs, 50% through
the naUonal and sub-naUonal government budget and 20% directly by state owned enterprises
• Power generaUon:
36,000 MW
• Gas distribuUon:
1 million household gas units developed
• IrrigaUon:
1 million Ha of new irrigated lands
• IrrigaUon rehab:
3 million Ha of irrigated lands rehabilitated
• New roads:
2,650 km
• Toll roads:
1,000 km
• Improved road maintenance:
46,700 km
• Airports:
15 new airports
• Ports:
24 new ports
• Ships:
550 new ships
• Railways:
3,258 km of new rails
• Urban mass transit:
1,099 of urban railways
• Bus-rapid transit:
29 ciUes to adopt
• Broadband ICT:
100% of all ciUes and regencies covered
• Housing:
1 million new public houses
Infrastructure investment needs 2015-2019
(~7% average GDP growth esBmated by BAPPENAS)
Sector
Road
Railways
Seaport
Airport
Ferries and inland waterways
Urban transport
Electricity
Oil and gas
InformaUon and
communicaUons technology
Water resources
Water supply and sanitaUon
Public housing
Total budget requirement for
infrastructure
Percentage (%)
APBN
APBD
268.0
200.0
93.0
–
260.0
–
64.0
5.0
37.0
–
61.0
15.0
120.0
–
4.3
–
SOE
PRIVATE
65.0
200.0
11.0
122.0
238.2
93.0
50.0
25.0
10.0
–
5.0
5.0
445.0
435.0
151.5
351.5
TOTAL
733.0
226.0
591.2
144.0
47.0
86.0
1,000.0
507.3
15.0
196.0
131.0
184.0
15.3
68.0
198.0
44.0
27.0
7.0
44.0
12.5
223.0
179.9
30.0
87.0
280.3
450.9
403.0
327.5
1,433.3
29.9
545.3
11.4
1,066.2
22.2
1,751.4
36.5
4,796.2
100.0
Infrastructure Financing Sources, 2015–2019
(Based on BAPPENAS esBmate)
Total need of
strategic
infrastructure
investment 1)
NaUonal • 143.3 bn US$
and
Regional • 54.5 bn US$
Budget 2)
• 106.7 bn US
$
(US$480 bn) 3) Financing
Gap
• 175.1 bn US
$
NaUonal gov’t
budget ~30%2)
Regional gov’t
budget ~11%
SOEs ~22%
Private
investment
(PPP, Loan,
ObligaUons,
etc.) ~36%
AlternaUve
Financing
Scheme
Notes:
1) EsUmate only.
2) PorUon of naUonal budgets based on agreed budget ceiling by MoF as proposed by the NaUonal Development Planning
Ministry
3) All esUmates are based on large investment and rehabilitaUon projects, e.g., excluding detailed operaUonal costs
PPPs in Indonesia
• Large unleashed PPP potenUal
• 38 PPPs in 2005-2014 for $35 billion
• A lot more to be tapped, given large unmet needs
• Recent reforms signal conUnued commitment to
PPPs:
• InsUtuUonal architecture (KPPIP/Commi-ee for
Accelerated Infrastructure delivery, PPP Unit in MOF)
• Infrastructure SOEs’ capital infusion
• Enhancement the funcUons of PT SMI (Sarana MulU
Infrastruktur), PT IIF (Indonesian Infrastructure
Finance) and PT IIGF
10
Indonesia: Addressing Infra Gap
• Key 2015 reforms to accelerate public sector infra spending:
• Mainstreaming of advance procurement:
• President set up Budget RealizaBon EvaluaBon
and Monitoring Team (chaired by MOF) to
debofleneck spending at central and local levels
• Capital injecBons to and revaluaBon of assets of
infra SOEs
• PT SMI’s capital increased by $1.6 bn to $2.1 bn
• AdopBon of direct lending scheme to ease SOE
access to IFI finance
• Expansion IIGF scope to guarantee SOE
borrowing
Indonesia: Addressing Infra Gap
• Key reforms to leverage private investment in infra:
• New Perpres on PPPs: now also social sectors covered and availabilitybased contracts possible
• OperaBonalizaBon of PPP Unit at MOF as one-stop-shop for PPP coordinaBon and
facilitaBon, including on gov’t support to PPPs
• Extension of BVGL scheme to 2019 and to also cover 35GW program
• $20 bn private investment in energy generaBon to be leveraged
• Further improvement of land acquisiBon framework
• IntroducBon of proxy mandate: private sector may conduct–on behalf of the government
contracBng agency–preparaBon, consultaBons, valuaBon, negoBaBon and compensaBon
for the procured land.
• OperaBonalizaBon of viability gap funding to raise afracBveness of
projects to investors
• 2 water supply projects will receive VGF in 2016 for total of IDR 1.15 tr
• Streamline investment licensing and facilitate foreign parBcipaBon in
PPPs
• TransformaBon of PT SMI to Infrastructure Development Fund or Bank
• ConsultaBon and analysis iniBated
• Relevant legislaBon expected to be adopted in 2017
Delivery constraints
• Long-term GOI financing: deficit limits, low tax take;
• Shortage of long-term rupiah resources: commercial banks
rely on short-term deposits and capital market is shallow;
• Land acquisiUon
• Project readiness: safeguards and detailed design
• CoordinaUon amongst government agencies
• Single-year budget and delayed budget release
• Local government capacity to procure and oversee
investments
• SOE financial management and balance-sheet constraints
• Tariffs linked to service costs and independent regulatory
oversight
Summary
• Need to think about infrastructure for what?
• Financing is a problem but readiness is also problem
• Readiness has policy, program development, land
acquisiUon, project preparaUon, central-local
coordinaUon, SOE finance, budget and financial
market challenges to overcome
• Need also to overcome legacy of fiscal restraint to
put compeUUveness first
Hotel Grand Hya-, Nusa Dua - Bali
10-11 December 2015
Presented by:
Steven Tabor
COUNTRY DIRECTOR
ASIAN DEVELOPMENT BANK – INDONESIA RESIDENT MISSION
Infrastructure for what?
To support new sources of growth
To foster more equitable development
To enable more sustainable development
To prepare for growing urbanizaUon
To tackle criUcal bo-lenecks and high costs
To address 15 years of under-investment and the
O&M neglect habit
• Social overhead capital: Austerity’s legacy
•
•
•
•
•
•
Why Infrastructure Investment is
Important…
• Key for higher and sustained economic growth necessary for poverty
reducUon and welfare improvement.
• Infrastructure development is necessary to:
• Maintain high, inclusive, and sustainable growth
• Meet the challenges of massive
• Achieve higher level of regional economic cooperaUon
• Infrastructure connecUvity reduces economic distance and increases
density and scale of economic acUvity.
• It improves producUvity and efficiency by:
• CreaUng greater opportuniUes for market access by reducing costs of
trade and physical movement
• SUmulaUng consumpUon through be-er delivery of goods and services
• Scaling up benefits when more countries are connected
Key CharacterisBcs of Infrastructure
Public Good
• ExternaliUes
• Non-excludability/free riders
• Poverty and other posiUve impacts
Long Horizon
• Need for long term financing
• PoliUcal risk/risk sharing
Bulky Investment
Infra-Industry Nexus
4
• Large investments by powerful agents
• Possible market dominance/regulatory
capture
• Dynamic of comparaUve advantage
• SubsUtute/complement for factors of
producUon
• Generate spaUal effects
Insufficient Infrastructure Spending in
Many ASEAN Countries
Infrastructure Needs vs Spending—ASEAN Economies
Country
EsBmated
Infra Needs
(2010-2020)
USD Billion
Needs as % of Infra Spend Infra Spend
EsBmated GDP as % of GDP as % of GDP
(Annual,
(1980-2009) (2012)
2010-2020)
Indonesia
450.0
6.2
7.0
2.7
Malaysia
188.1
6.7
6.0
3.5
Philippines
127.0
6.1
2.0
2.2
Thailand
173.0
4.9
4.0
2.0
Viet Nam
110.0
8.1
12.8
(for 2009)
9.2
Cambodia;
Lao PDR;
Myanmar
46.5
9.5
N.A.
~4.0
Source: Bha-acharyay, Kawai, Nag (2012); ADB staff esUmates.
Indonesia: Addressing Infra Gap
• 2015-2019 RPJM
• Major infra
investments in
transport and
electricity
• Public sector: 70%
of total infra
investments
• Public infra
investments to
rise from 4.2% of
GDP in 2015 to
6.2% of GDP in
2019
2015-2019 National Medium Term Development Plan,
Infrastructure Investments by Funding Source
$170 bn
40%
$130 bn
30%
$82 bn
20%
National Gov't
$42 bn
10%
Sub-national gov'ts
SOEs
Private sector
Delivery Targets Are Enormous
RPJM --- $480 billion with 30% expected to be financed by the private sector through PPPs, 50% through
the naUonal and sub-naUonal government budget and 20% directly by state owned enterprises
• Power generaUon:
36,000 MW
• Gas distribuUon:
1 million household gas units developed
• IrrigaUon:
1 million Ha of new irrigated lands
• IrrigaUon rehab:
3 million Ha of irrigated lands rehabilitated
• New roads:
2,650 km
• Toll roads:
1,000 km
• Improved road maintenance:
46,700 km
• Airports:
15 new airports
• Ports:
24 new ports
• Ships:
550 new ships
• Railways:
3,258 km of new rails
• Urban mass transit:
1,099 of urban railways
• Bus-rapid transit:
29 ciUes to adopt
• Broadband ICT:
100% of all ciUes and regencies covered
• Housing:
1 million new public houses
Infrastructure investment needs 2015-2019
(~7% average GDP growth esBmated by BAPPENAS)
Sector
Road
Railways
Seaport
Airport
Ferries and inland waterways
Urban transport
Electricity
Oil and gas
InformaUon and
communicaUons technology
Water resources
Water supply and sanitaUon
Public housing
Total budget requirement for
infrastructure
Percentage (%)
APBN
APBD
268.0
200.0
93.0
–
260.0
–
64.0
5.0
37.0
–
61.0
15.0
120.0
–
4.3
–
SOE
PRIVATE
65.0
200.0
11.0
122.0
238.2
93.0
50.0
25.0
10.0
–
5.0
5.0
445.0
435.0
151.5
351.5
TOTAL
733.0
226.0
591.2
144.0
47.0
86.0
1,000.0
507.3
15.0
196.0
131.0
184.0
15.3
68.0
198.0
44.0
27.0
7.0
44.0
12.5
223.0
179.9
30.0
87.0
280.3
450.9
403.0
327.5
1,433.3
29.9
545.3
11.4
1,066.2
22.2
1,751.4
36.5
4,796.2
100.0
Infrastructure Financing Sources, 2015–2019
(Based on BAPPENAS esBmate)
Total need of
strategic
infrastructure
investment 1)
NaUonal • 143.3 bn US$
and
Regional • 54.5 bn US$
Budget 2)
• 106.7 bn US
$
(US$480 bn) 3) Financing
Gap
• 175.1 bn US
$
NaUonal gov’t
budget ~30%2)
Regional gov’t
budget ~11%
SOEs ~22%
Private
investment
(PPP, Loan,
ObligaUons,
etc.) ~36%
AlternaUve
Financing
Scheme
Notes:
1) EsUmate only.
2) PorUon of naUonal budgets based on agreed budget ceiling by MoF as proposed by the NaUonal Development Planning
Ministry
3) All esUmates are based on large investment and rehabilitaUon projects, e.g., excluding detailed operaUonal costs
PPPs in Indonesia
• Large unleashed PPP potenUal
• 38 PPPs in 2005-2014 for $35 billion
• A lot more to be tapped, given large unmet needs
• Recent reforms signal conUnued commitment to
PPPs:
• InsUtuUonal architecture (KPPIP/Commi-ee for
Accelerated Infrastructure delivery, PPP Unit in MOF)
• Infrastructure SOEs’ capital infusion
• Enhancement the funcUons of PT SMI (Sarana MulU
Infrastruktur), PT IIF (Indonesian Infrastructure
Finance) and PT IIGF
10
Indonesia: Addressing Infra Gap
• Key 2015 reforms to accelerate public sector infra spending:
• Mainstreaming of advance procurement:
• President set up Budget RealizaBon EvaluaBon
and Monitoring Team (chaired by MOF) to
debofleneck spending at central and local levels
• Capital injecBons to and revaluaBon of assets of
infra SOEs
• PT SMI’s capital increased by $1.6 bn to $2.1 bn
• AdopBon of direct lending scheme to ease SOE
access to IFI finance
• Expansion IIGF scope to guarantee SOE
borrowing
Indonesia: Addressing Infra Gap
• Key reforms to leverage private investment in infra:
• New Perpres on PPPs: now also social sectors covered and availabilitybased contracts possible
• OperaBonalizaBon of PPP Unit at MOF as one-stop-shop for PPP coordinaBon and
facilitaBon, including on gov’t support to PPPs
• Extension of BVGL scheme to 2019 and to also cover 35GW program
• $20 bn private investment in energy generaBon to be leveraged
• Further improvement of land acquisiBon framework
• IntroducBon of proxy mandate: private sector may conduct–on behalf of the government
contracBng agency–preparaBon, consultaBons, valuaBon, negoBaBon and compensaBon
for the procured land.
• OperaBonalizaBon of viability gap funding to raise afracBveness of
projects to investors
• 2 water supply projects will receive VGF in 2016 for total of IDR 1.15 tr
• Streamline investment licensing and facilitate foreign parBcipaBon in
PPPs
• TransformaBon of PT SMI to Infrastructure Development Fund or Bank
• ConsultaBon and analysis iniBated
• Relevant legislaBon expected to be adopted in 2017
Delivery constraints
• Long-term GOI financing: deficit limits, low tax take;
• Shortage of long-term rupiah resources: commercial banks
rely on short-term deposits and capital market is shallow;
• Land acquisiUon
• Project readiness: safeguards and detailed design
• CoordinaUon amongst government agencies
• Single-year budget and delayed budget release
• Local government capacity to procure and oversee
investments
• SOE financial management and balance-sheet constraints
• Tariffs linked to service costs and independent regulatory
oversight
Summary
• Need to think about infrastructure for what?
• Financing is a problem but readiness is also problem
• Readiness has policy, program development, land
acquisiUon, project preparaUon, central-local
coordinaUon, SOE finance, budget and financial
market challenges to overcome
• Need also to overcome legacy of fiscal restraint to
put compeUUveness first