The many accidents which continue to hamper the progress of ongoing Indonesian infrastructure projects have reminded us all of the risks associated with improper standards where such projects are concerned. The total costs involved in the current round of Indonesian infrastructure projects amounts to an estimated IDR 4,197 trillion (USD 293.7 billion). Moreover, only 42% of this total is being sourced from the government, while the remaining 58% is being financed by the private sector through a number of funding schemes. One such scheme is the Non-Government Budget Investment Financing Program (Program Pembiayaan Investasi Non-Anggaran Pemerintah, henceforth referred to as PINA).
PINA was launched last February by the Indonesian Government and is set to run for a period of one year. According to the Ministry for Development Planning/Head of National Development Planning Agency (Menteri PPN/Kepala Bappenas), as of December 2017, some 34 infrastructure projects were in the PINA pipeline with a total combined value of IDR 348.2 trillion (USD 25.79 billion). The 2018 Indonesian Budget (APBN) shows clearly that infrastructure remains the government’s top development priority and the country’s urgent infrastructure requirements are also reflected in the Medium-Term National Development Plan for 2015 – 2019, which currently has a budget of some IDR 6,541 trillion (USD 503.2 billion).
Indonesia desperately needs to upgrade its infrastructure, however, the government is limited in terms of the funding that it can provide. As a result of this funding shortfall, the PINA project was launched and, according to the government, will complement the Public – Private Partnership (PPP) scheme. PINA is currently up and running, although in spite of the government’s best efforts, PINA has a number of problems associated with it.
Firstly, the non-APBN/Regional Government Budget (APBD) scheme used in PINA has not been well administered. This scheme differs from the KPBU, which is still mentioned in the APBN. Under the PINA scheme, investors fund projects in advance, without any government interference. In terms of land-provision funding though, the government is obliged to provide returns on any investments. As a result of this, the government should budget for such investment returns within the APBN/APBD in order to assure investors. Moreover, under PINA, the government is cooperating with a number of State-Owned Enterprises (SOE), which fall under the ambit of state finances. Based on Law Number 19 of 2003 which addresses the BUMN, the acceptance of grants/loans from BUMN or Regionally Owned Enterprises should be set in advance under the APBN/APBD.
Also, Law Number 17 of 2003, which specifically addresses the area of state finances, states that public services are the state’s responsibility, and this includes payments which are made to any third parties. This law also states that any state assets or local assets in the form of money, which are managed either by the state or by other parties, also fall under the control of state finances and should thus be officially budgeted through the APBN/APBD.
The PINA project is a non-APBN/APBD scheme which has been specifically designed so that it does not place any burden upon state finances. However, this means that the project has the potential to operate without any control or oversight from the Indonesian House of Representatives (DPR) or Regional DPR, which has a budgeting function. As a project that operates outside of the APBN/APBDD framework, PINA is considered a non-budgetary project, in spite of the fact that such projects have in fact been banned since the start of Indonesia’s reform era.
Such non-budgetary activity reflects poorly on the current administration and also violates the State Finance Law. It appears as if the government has forgotten that APBN/APBD is not only about the allocation of government money but also has a number of other functions, such as authorization, planning, control, allocation, distribution and stabilization. Indeed, the recent case of misuse involving the Ummah Endowment (Dana Abadi Ummat), which is not specifically addressed under the APBN, as well as surplus funds relating to a land and construction case under the Regional Government of DKI Jakarta, offer a sobering lesson in the need to avoid non-budgetary activity.
A second problem concerns PINA’s legal basis. These various multi-trillion rupiah projects are in fact based entirely on Presidential Regulation Number 58 of 2017 (PR 58/2017), which is basically an amendment to Presidential Regulation Number 3 of 2016 on the Accelerated Implementation of Nationally Strategic Projects. Moreover, the PINA project was actually in operation prior to the issuance of Presidential Regulation 58/2017, which came into force in June 2017. These Presidential Regulations show flexibility on the part of the current president, however projects could also become prone to investment uncertainties, as the next president could easily alter the project mechanism. Thus, in order to adequately regulate any long-term investment push, the issuance of Presidential Regulations is not sufficient, as such regulations are ultimately merely implementing regulations.
In addition, research undertaken for this piece indicates that there are currently no regulations governing any substantive PINA-related matters, such as definitions, sources of funding, investment guarantees, persons in charge, limitation of each party’s responsibilities, project deadlines, investment returns and budget limitations for each project. This state of affairs has led to a vacuum as regards the implementation of PINA, which is thus reliant on improvisation in the field and which could thus easily be infiltrated by irresponsible parties. As a result, PINA is qualitatively different from the KPBU scheme, as regulated in detail under Perpres Number 38 of 2015 on the Government Partnership with the Business Agency for the Provision of Infrastructure.
Finally, the role of Bappenas, as the institution responsible for PINA, is not being properly implemented. According to its job description, Bappenas is the development planner, so Bappenas should therefore not also be in charge of projects, as this will lead to double administrative function, i.e., Bappenas playing the role of both planner and implementer. The designation of Bappenas in the role of coordinator already represents a significant workload, as this role should be fully implemented across all PINA projects. If BUMN is responsible for the implementation of most PINA projects, then it would be more appropriate if said projects fell under the control of the Ministry of State-Owned Enterprises (SOE). On the other hand, the role of coordinator could also be filled by the State Treasury at the Ministry of Finance, or the relevant technical ministry in terms of any given project.
These various PINA-related issues are a ticking time bomb that needs to be addressed by the government at the earliest opportunity. In order to resolve these issues though, one approach remains paramount, specifically, in the words of the President himself: “Don’t be noisy!” This advice is especially pertinent as we enter an election year in which there is great potential for misuses of power and misdeeds in the interests of certain parties.
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