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Indonesia to increase road projects budget in 2020

Out-Law News | 03 Sep 2019 | 11:46 am | 1 min. read

The government of Indonesia will increase its spending on road infrastructure to RP419 trillion ($29 billion) in 2020, a 4.9% increase on 2019 spending.

According to Jakarta globe, the construction of 837 kilometres of new roads is planned, more than double of the target of 406km in 2019, finance minister Sri Mulyani Indrawati said. The government will also build 6.9km of new bridges, 238km of railway, three airports, 49 dams, 5,224 apartments and 2,000 low-income homes.

Financing will be provided in cooperation with private companies and state owned enterprises (SOEs) to speed up the development of infrastructure, an article from Pwc said.

Public-private partnership (PPP) structures will be used "for long-term financing policies outside of the state budget". The PPP scheme will include 11 projects valued at RP 19.7 trillion ($1.38b) in 2010. The 238km of railway track construction in 2020 will cost Rp3.62 trillion ($254 million). Rehabilitation of 229km of railway tracks will cost Rp1.59 trillion ($112m).

Earlier this month Indonesian president Joko Widodo proposed a PR2, 528.8 trillion ($177.56b) budget to parliament for 2020. According to his speech, the budget would be focused on five main areas: human resource development; infrastructure improvement; reinforcement of social protection; regional autonomy, and anticipation of global uncertainty.

In July Widodo announced plans to spend $70bn on toll roads connecting Indonesia to other countries. The plans involve building 5,400km of fee-charging highways by 2024 tripling the size of the current network to boost economy.

Infrastructure expert James Harris of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, the law firm behind Out-Law, said, "We welcome this news enthusiastically and look forward to supporting both public and private sector clients in bringing individual transactions in Indonesia to a successful financial close or completion. "

"However, there is still a need within Indonesian government ranks to bring investable and bankable toll road and other concessions to market. There has been a definite improvement on that in recent years but there’s still a bit more to do in order to attract greater offshore private sector participation in the Indonesian nfrastructure markets, including roads," he said.