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PublicInvestmentManagementAssessment:ExperiencesfromIndonesia
TaufikHanafiDeputyMinisterforDevelopmentMonitoring, Evaluation,andControl
MinistryofNationalDevelopmentPlanning/NationalDevelopmentPlanningAgency
PresentedatTokyoFiscalForum2019inSession2:MakingPublicInvestmentMoreEfficientinAsia”
Tokyo, November20-21,2019
Most populous country in the world
Largest economy in the world
Private consumption grows steadily
4th
16th
±5%
Indonesia is a huge potential market in Asia 5thLargest emerging market with the best middle class potential
Source: BPS, Team Analysis
2
Realizing Indonesia’s Potential
3
Indonesia 2045High Income Country and 5th GDP in the World
ESCAPE FROM MIDDLE-INCOME TRAP (MIT)
Year
2036
GDP PER CAPITA 2015
US$3,377
US$23,199LARGEST GDP 2015
16th
5thin the world
DEMOGRAPHIC BONUS
~2040
INVESTMENT
FDI inflows ratio to GDP
4.5%Investment share of GDP
38.1%
2015
FDI Inflows ratio
to GDP
2.3%Investment
share of GDP
32.8%
INFRASTRUCTUREPOVERTY LEVEL GINI RATIO
REGIONAL DEVELOPMENT
2018
9.66%
2045
~ 0 %
2015 2045JavaOutside Java
58.3%41.7%
51.8%48.2%
KBIKTI
80.5%19.5%
74.9%25.1%
Logistic cost in 2045 will be reduced to
8% GDP. Infrastructure Stock increases to
70% GDP in 2045.
4
Economy of Eastern Indonesian Region (KTI) and Outside Javagrows higher while maintaining growth momentum in Java
Direction of Regional Development
Papua
Bali, Nusa Tenggara & Maluku
Sulawesi
Kalimantan
Java
Sumatera
National Food Basis & Resources-based Economy
International Tourism & National Fishery Basis
Food Industry Basis & Gate for KTI
Manufacturing Industry & National Energy Basis
Trade & Services Basis
New Industrial Basis & Gate to Asia Region
Strategy:• Accessibility and quality of basic services• Social protection• Asset tenure and financial inclusiveness• Entrepreneurship and access to productive
resource• Fiscal policy• Public participation in social, politics, and economy
Strategy:§ Enhancing physical and virtual
connectivity§ Promoting equitable development
among regions§ Fulfilling access for basic services§ Supporting urban and Rural
Development§ Anticipation of natural disaster and
climate change, including sea-level rises
2018
0.3842045
0.34-0.35
KBI:WesternIndonesianRegion
Indonesia 2045Equitable Development
High and Stable Economic Growth
Progressive Infrastructure Development
5.1
0
1
2
3
4
5
6
2014 2015 2016 2017 2018 2019*
GDP Growth (%)
Source: BPS (*Q2 2019)
Indonesia is projected to be thelargest economy in the world by 20504th
Source: World in 2050, PWC
Indonesia’s Development Achievements
Continuous Improvement in Indonesia’s Credit Ratings
Indonesia Continues to Improve Its Business Climate
BBB-BBB
59.15 58.12
61.52
66.4767.96
40
45
50
55
60
65
70
2015 2016 2017 2018 2019
E O D B S COR E
Vietnam Indonesia India Philippines Myanmar
5Source: Worldbank, 2019Source: Standard & Poor's Global Ratings
-15
-10
-5
0
5
10
15
1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 2018
Indonesianeconomicgrowth (%yoy)low growth
base soaring oil prices
falling oil prices
growth of the manufacturing &
liberalization sector soaring commodity prices
Asian Financial Crisis
average2000-2018
5.3%
average1980-1996
6.4%
average1968-1979
7.5%
Extra efforts are needed to increase and maintain Indonesia's economic growth….
Source:BPS,CEIC(processed)
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Economic growth (%)
Urgency to Stabilize Indonesia's Economic Growth
6
Challenges for Economic Growth
Infrastructure:Inadequate, especially connectivity
Human Resources is a binding constraint for medium-long term economic growth
Fiscal:Low tax revenue
(If it is not resolved at this time, it will prevent Indonesia from competing in the digital era and turning to high-tech manufacturing)
Inhibiting Indonesia's Economic Growth (Illustration of Water Vessel)
The Most Binding ConstraintBinding Constraint
Not Binding Constraint
Future Binding Constraint(If not resolved, it will prevent Indonesia from competing in the digital era and move to high-tech manufacturing)
Regulation and Institutions• The regulations do not support the creation and development of
businesses, and even tend to limit, especially on investment regulations
• Low quality institutions• Weak coordination between policies
7
Source: Logistic Performance Index, World Bank (2018)
42.5%
4,210.2
-
1,000
2,000
3,000
4,000
5,000
-
20
40
60
80
100
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
as % of GDP Capital Stock
Source: Prospera
RpTr
illio
n
Perc
ent (
%)
Indonesia’s Infrastructure Stock
IndonesiaUK
43%57%
76%87%
Sources: World Bank (2015), Mckinsey Global Institute Report (2013)
CanadaIndia
USAGermany
Spain PolandChina
South Africa
Italy
58% 58% 64% 71% 73%80% 82%
43%vsaverage70%
Global Infrastructure Stock
6026 46
China
41
Malaysia
3932
Thailand Vietnam Indonesia Philippines
8% 8% 9% 9%
13% 13% 13% 14% 15%
20%
24%
Infrastructure and Logistic Performance:Global vs Indonesia
Logistic Performance Index
Singapore
7
Logistic Cost (% of GDP)
Source: Ministry of Industry of The Republic of Indonesia 8
Strengthening Economic Resilience for Quality Growth
Developing Areas to Reduce Inequality
Increasing Human Resources Quality and Competitiveness
Mental Revolution and Cultural Development
Strengthening Infrastructure to Support Economic Development and Basic Services
Building the Environment, Enhancing Disaster Resilience and Climate Change
Strengthening Politic, Law, Security Stability and Transforming Public Services
7 Development AgendaMedium-term National Development Plan 2020-2024
9
10
AsiaandIndonesia’sInfrastructureInvestmentNeed
-
40
80
120
160
200
Indo
nesia
(201
7)
Brazil
Unite
dKingdo
m
Canada
India
Unite
dStates
Germ
any
Spain
China
Poland
Italy
SouthAfric
a
Japan
Average excludingJapan(70%)
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
-
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
TotalStockas%
ofG
DP
IDRTrillion
TotalCapitalStock TotalStockas%ofGDP
INDONESIA’SINFRASTRUCTURECAPITAL STOCK
Indonesia’sInfrastructureGapin2005to2015=USD1.5trillionorIDR20,250trillion
Indonesia’sInfrastructureGap=27%GDP
Source:Indonesia- Prospera Infradashboard (2018),Others:McKinsey(2013)
FUTUREINFRASTRUCTUREINVESTMENTNEEDINASIA
Thistranslateto$1.7 trillionperyear
Source:ADB(2018)
2016 2030$26 trillion
*Including PRC
CurrentInvestmentperyear
$881billionInvestmentGapperyear
$459billion
SOCIALINFRASTRUCTUREINVESTMENTGAP
PolicyAction#1(A):IntegratedBasicServices
11
National Drinking Water Access 2016: 61,12%
2018: 61,29%2024: 100,00%
National Sanitation Access2016: 76,37%
2018: 77,91%2024: 100,00%
Decrease Open Defecation
2016: 11,68%
2018: 9,36%2024: 0,00%
National Housing Access
2016: 37,2%
2018: 38,30%2024: 52,78%
Integrated dam usage:Water, Food, Energy Nexus
Waterfoodenergynexustoimproveservicesfordrinkingwater,irrigationandhydropowerneeds.In2024,wefocuseson completingconstruction oftheremaining36dams
KualaTanjung IEBatubara,North SumatraTotalArea:365HaMainConnectivity:KualaTanjungPort,KualaNamu Airport,KualaTanjung Railway
Dumai IEBengkalis, RiauTotalArea:467HaMainConnectivity:Dumai Port,Dumai Airport
Jambi IEMuaro Jambi,JambiTotalArea:313HaMainConnectivity :JambiPort,SultanThaha Airport
TanjungApi-api IEBanyuasin, South SumatraTotalArea:373HaMainConnectivity:TanjungApi-api Port,SultanMahmudBadaruddin Airport
Tanggamus IELampung Selatan,LampungTotalArea:10HaMainConnectivity:Panjang Port,Bakauheni Port and Raden Inten II Airport
ArunLhoksumaweSpecialEconomicZoneLhoksumawe, AcehTotalArea:2623HaMainConnectivity:KruengGeukeuh Port,Arun-LhoksumawePort
SeiMangkei IESimalungun, North SumatraTotalArea:2002,7 HaMainConnectivity:Belawan andKualaTanjung Port,TransSumatera Toll,TransSumateraRailway
Tj.Kelayang SpecialEconomicZoneBanyuasin, South SumatraTotalArea:373HaMainConnectivity:TanjungApi-api Port,SultanMahmudBadaruddin Airport
InfrastructureforPriorityDevelopment inSumatraRegion
PolicyAction#1(B):InfrastructuretoSupportEconomicSector
12
SeaTollsDevelopmentConcept
Thedevelopmentofportshubwithoperationalstandardsare2portsin2020and7ports in2024
New Airport2016: 4 airport
2018: 11 airport2024: 20 airport
Construction of Railroad Track (cumulative)
2016: 144 Km
2018: 735 Km2024: 1350 Km
Construction of New Road (cumulative)
2016: 1845 Km
2018: 3482 Km2024: 3000 Km
Construction of Toll Road (cumulative)
2016: 213 Km
2018: 1180 Km2024: 3000 Km
PolicyAction#1(C):IntegratedUrbanDevelopment:MetropolitanArea
13
Institutional/authoritylimitationsthatareabletointegratethedevelopmentofurbantransportationacrossadministrationsandacrosstransportsystemsinthemetropolitanarea
• MetropolitanArea(UrbanAreaBased,Population>1millioninhabitants)• Hasapolicy/strategyfordevelopingurbanmobility• Regionalfiscalcapacity• Policycommitments,budgets,andoptimizationofotherrevenuesources
• PreFeasibilityStudy thataccommodatesmodalchoice,socialfeasibility,environment
• Optimizingsourcesoffinancingforbusinessentitiesand/orprivatesector
RTRW,RDTR,UrbanMobilityPlanandPolicy,TransportationMasterPlan
NewParadigmofInvestinginInfrastructureTotalInvestmentRequired forInfrastructure in Indonesia
*)source:Bappenas analysist**)Calculation basedonProspera AnalysisforRPJMN2020– 2024thatstillbeingfinalised
InfraSAP recommendation has been implemented:
The government should systematically leverage private sector financing where feasible and maximize finance for development
Paiton Powerplant (3390MW)PTPaiton Energy - PTjawa Power– PTPembangkitan JawaBali
MRTJakarta– 16KM–USD 1,1B –4consortiums• JV–SOE- Statebudget- RegionalBudget - JICAloan
IPP1.3GW
EquityfinancingUSD13M
Partof
WaskitaToll RoadShareDivestmentUSD10B
2018StateBudgetforInfrastructure
Verticalhousing13,405units
PalapaRingUSD545M
UmbulanWaterSupplyUSD140.7M
USD28B Newroads432km
GovernmentBudget:
USD148.2B
(41,3%)
StateOwnedEnterprises:
USD79.8B
(22,2%)
Private:
USD131.1B
(36,5%)
TOTAL:USD359.2Bn(2015-2019)*1)
In2020-2024infrastructureinvestmentrequires
Approx. USD441.3B**)
“governmentencourages theinvolvementoftheprivatesectorininfrastructuredevelopment”
PRIVATE
PPP
StateBudget(APBN/D)
JVSOEs(greenfield)
JVSOEs(brownfield)
PINA
MentawaiOff-gridBiomassPlant USD27.7M
PolicyAction#2:NewParadigminInfrastructureInvestmentFramework
14
PolicyAction#3:Improvingprojectdeliverables...IndicativeActionPlanadoptingIMF’sPIMArecommendations...
PIMAAssessment1. Institutional Design: Project
appraisalisrequiredbutnostandardmethodologyandnosystematicriskassessment.
2. Effectiveness:Someprojectsareappraised,usingnonstandardmethodologyandwithlimitedcentralsupport.
PIMAAssessment1. Institutional Design: Projects
reviewedandselectedbyBappenasandMoF,butnopipelineofappraisedprojects.
2. Effectiveness:Qualitycontrol isweak,exceptfor donor-fundedandnationalstrategicprojects,includingPPPs.
Action Plan• Currently loan and grants project
and PPP project has alreadyconsider technical feasibility andreadiness criteria in projectappraisal
• We are currently improving andexpanding this effort by adoptingmore critical assessment tool (5Case Model: Strategic, Economic,Commercial, Financial, andManagement) from UK Governmentin order to standardize the appraisalsystem in infrastructure project
NationalandSectoralPlans
Action Plan• Improving project selection and
pipeline.• The major project will be the base
of multi years budgeting andguidelines for the Strategic Plan ofline ministries/agencies, FundingSource Documents, PPP Book, andNational Strategic Project
PIMAAssessment1. Institutional Design:Medium-term
developmentplans presentprogramswithnumericaltargetsandindicativecosts.
2. Effectiveness:Absenceofproject-levelinformationlimitseffectiveness.
Action Plan• In Mid-term NationalDevelopment Plans 2020 –2024, we have innovation topresent the major projects thatwill be implemented on 5years.
ProjectSelection ProjectAppraisal Portfoliomanagementandoversight
PIMAAssessment1. Institutional Design: Bappenas
monitors implementationofworkprogramsbutnosystematicex-postreview.
2. Effectiveness:Limitedfocusoninvestments,in particularonmulti-yearprojects,exceptforstrategicprojects.
Action Plan• Improving monitoring andevaluation not only limited toimpact and outcome but also inthe level of project
15
THANK YOU
16