APSN Banner

More infrastructure development to stimulate economy hard hit by Covid-19 outbreak

Jakarta Globe - March 10, 2020

Tara Marchelin, Jakarta – The Finance Ministry has issued a fiscal stimulus to boost economic activities in Indonesia, which have slowed down considerably recently as a result of the developing Covid-19 outbreak. The stimulus will include more infrastructure development, according to Deputy Finance Minister Suahasil Nazara.

"Infrastructure development should recharge our economy, which has been weakened by the Covid-19 outbreak," Suahasil said in Jakarta on Monday.

Before it raised the specter of a global recession, the Covid-19 outbreak had already cut off the supply of important raw materials from China to Indonesia and threatened to cripple production in several industries.

"Several industrial sectors have been affected by the shortage of materials from China. Tourism has suffered, too. Airlines have been losing passengers since we started banning travelers from certain countries. We'll have to lower our economic expectation this year," Suahasil said.

According to the deputy minister, the economic slowdown has also cut into the government's budget for infrastructure development. This is why the public-private partnership (PPP) financing scheme has become doubly important.

"The PPP is an alternative financing source for infrastructure development that involves a collaboration between the government and private companies. With PPP, we can reduce the burden on the state budget," Suahasil said.

More effective, more infrastructure

Private company involvement will make development more efficient, project calculation more precise and, ultimately, result in more infrastructure projects, according to Suahasil.

"Half of PPP financing comes from the local government budget and the other half from private companies. That way we can use the rest of the local government budget to build even more infrastructures," he said.

A state-owned company operating under the Finance Ministry, the Indonesia Infrastructure Guarantee Fund (IIFG), will guarantee all infrastructure projects paid for with PPP financing.

"The IIGF ensures financial transparency and sustainable implementation," Suahasil said.

At its launch, the PPP scheme was only made available to ministries and government agencies with many infrastructure projects under their belt.

It was only later that the scheme was offered to local governments since they often have a huge budget to build or improve local infrastructures. "The Finance Ministry is totally behind the PPP and IIGF," Suahasil said.

Source: https://jakartaglobe.id/business/more-infrastructure-development-to-stimulate-economy-hard-hit-by-covid19-outbreak