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23 Oct 2019 | 17:35 WIB
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Indonesian Infrastructure: Coming from behind

As of 27 August, the Public Works Ministry had disbursed only 28% of its 2015 budget of IDR118.5tn, lower than the 44% level for the same period in 2014, which can largely be attributed to late budget discussions and ministerial restructuring. The Public Works Ministry acknowledged that it is behind in disbursing this year’s budget, but it still expects to disburse 93% of the total budget (exhibit 1) by year-end.

To do so, the ministry plans to accelerate payments on existing multi-year contracts (MYCs), especially for dam construction, while increasing the number of shifts and workers on the projects. Historically, the Public Works Ministry has disbursed only 90-95% of its budget, as the tendering process resulted in lower-than-expected project costs. Thus, the ministry plans to utilize the leftover budget to finance unfinished single-year projects.


The Public Works Ministry is of the view that its addition onto the Coordinating Maritime and Resources Affairs Ministry’s portfolio was meant to group together infra-related technical ministries to increase synergies. The Coordinating Maritime Affairs Ministry currently manages the Transportation Ministry and the Energy and Mineral Ministry, which require solid coordination with the Public Works Ministry to create improved output on infrastructure projects.


Additionally, the Public Works Ministry expects no delay in the tender process for new projects and budget disbursements for existing projects, as the Budget Implementation List (DIPA) is signed only by the Public Works Ministry. Separately, to accelerate infrastructure progress in Indonesia, the Public Works Ministry has been conducting bi-weekly meetings with the Ministry of State Owned Enterprises, the Ministry of Agrarian and Spatial Planning and the Ministry of Environment and Forestry.


Of the 2015 Public Works budget of IDR118.5tn, around IDR91.8tn (77.5%) was allocated for tendered projects (exhibit 2), while the remaining amount was used for self-managed projects (IDR9.9tn – 8.3%), land clearing (IDR9.4tn – 8%) and general administration (IDR7.4tn – 6.2%). Around 85% of the tendered projects are allocated for single-year projects, while the remaining 15% (IDR13.7tn) is assigned for MYCs. Going forward, the ministry plans to increase the MYC portion to 25-30% and has received a positive response from the Ministry of Finance.


The Ministry also plans to reduce the number of its project packages (2015: 14,704 packages) to create enhanced supervision and budget disbursement. However, we note that a number of small contractors have rejected this idea for fear of lowering their chances of receiving government projects.


The recently released 2016 State Budget Draft (RAPBN) indicates that the Public Works Ministry would receive a lower budget allocation of IDR104tn. Although investment by SOEs would make up some of the burden (e.g., Jasa Marga and Waskita Karya for the Trans-Java toll roads and Hutama Karya for the Trans-Sumatra toll road), the Public Works Ministry would require a higher budget to complete all of its programs.


Finally, with the number of projects increasing, shortage of engineers has become another concern of the Public Works Ministry. This coupled with rising overseas funding, may result in higher numbers of foreign employees and engineers working in Indonesia’s infrastructure industry going forward.

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