Infrastructure development is needed to accelerate economic growth, improve social welfare and provide better public services. The involvement of the private sector in infrastructure development will create better public services and innovation. In this regard, the Government of Indonesia is introducing Public-Private Partnership (PPP) in infrastructure provision to allow the government to cooperate with the private sector based on the principle of optimum allocation of risks. The implementation of this scheme is regulated in Presidential Regulation No. 38 of 2015. To support the implementation of PPP in Indonesia, the Ministry of Finance has committed to provide various facilities and government support, i.e. project development facility, viability gap fund, and infrastructure guarantee. The Ministry of Finance also introduced the availability payment (AP) as a return on investment scheme in PPP project. Some of the advantages of AP scheme are, among others, the absence of demand risk for the project company and the certainty of return on investment. In order to support the implementation of PPP scheme and rise new projects that focus on public services, the Ministry of Finance also established the Directorate of Government Support and Infrastructure Financing Management (PDPPI) within the Directorate General of Budget Financing and Risk Management. The PDPPI performs the role of managing the provision of facilities and government support, as well as facilitating the contracting agencies in preparing and conducting the PPP project transactions. This support is the manifestation of the Government efforts to support and fortify the development of infrastructure by bridging the private sector excellence and public sector eminence for the improvement of life quality of people of Indonesia.
Based on Presidential Decree Number 38 Year 2015, PPP is a cooperation between the government and the private entity in the provision of infrastructure for public interest by referring to the pre-determined specifications by ministers/heads of institutions/regional head/SOEs/ROEs, partly or wholly using the resources of the private entity taking into account the sharing of risks among the parties. According to the World Bank’s PPP Reference Guide, PPP is also broadly defined as a long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility and remuneration is linked to performance.
With the implementation of PPP, the Government can provide adequate infrastructure services to the public more effectively, efficiently, accountably, and sustainably. PPP modality offer: