View on Infrastructure Projects in Indonesia - Photo by IIGF
JAKARTA (TheInsiderStories) – Indonesia intensifies its effort to reduce pressures on the rupiah. After implementing the biodiesel policy to curb crude imports and announcing higher import tariffs on 1,147 tariffs, the government will soon announce a list of infrastructure projects put on hold.
Delaying infrastructure projects would help to reduce imports of capital goods which in turn help to stabilize the Rupiah. Coordinating Minister for Economic Affairs Darmin Nasution explained on Thursday (06/09), the government discourse of delays in the construction of National Strategic Projects (NSP).
The aim is to suppress imports, especially in the midst of the recent pressure on the Rupiah. The project criteria to be postponed are in the preparation stage, not part of the NSP’ project and not in the financial closing stage, said Nasution.
“Basically discussing the postponement of national strategic projects that need to be done by considering several things,” he said at his office.
Last April, the Government decided to trim the number of projects in the list of its NSP due to slow development progress. The government decided to drop 14 projects with worth of Rp264 trillion (US$19.27 trillion) from the NSP list, which makes this year’s priority projects to go down to 222 projects, plus three programs. That compared to 245 projects and two programs previously.
Based on the government’s data, the 14 projects among others are Jambi – Palembang railway, East Kalimantan Railway, Water Supply System in North Sumatra, Polesika Dam in Central Sulawesi and Special Economic Zones in Merauke, Papua.
The minister said the 222 projects need a total investment of Rp4,100 trillion (US$96.55 billion). This year, the government expects 10 projects to be completed.
In the following year, government decided to add 55 projects plus one program and cut 15 projects from the previous 225 projects and one program. In 2017, the government decided to list 245 projects plus two programs.
According to director of state-owned power producer PT Perusahaan Listrik Negara Syovie Felienty Roekman ensured the construction of electricity classified as Renewable Energy was not delayed. But two other projects, such as steam and diesel power plant have the potential to be postponed.
Meanwhile, the Ministry of Public Works and Public Housing (PWPH) targets 26 NSP will be completed later this year. The project consists of eight dams, three irrigation network, 12 highways and three housing.
Followed by 53 NSP were completed in 2019 are the 12 dams, three irrigation, 29 highways, four national roads and the water supply system and sanitation. The rest will be completed after 2019.
The minister Basuki Hadimuljono said the availability of infrastructure is needed to enhance national competitiveness and equitable development results in various regions in Indonesia. There are five categories of infrastructure which is the energy, transportation, water resources, telecommunications and housing.
In Presidential Decree Number 56 Year 2018, which is the second amendment of Presidential Decree No. 3 Year 2015 on the Acceleration of the Implementation of NSP, there are 137 infrastructure projects of 227 NSP are under PWPH ministry.
The projects consists of 51 dam projects, six irrigation projects, one project sea dike, 64 highway projects, four projects of national roads, seven projects in water supply and sanitation and three housing projects.
Hadimuljono confirmed the completion of the 137 NSP will maximizing the Domestic Component Level (DCL), which currently ranges from 87 percent to 90 percent. Some attempts have also been made to further improve the DCL, he added.
Head of Bank Mandiri Senior Economist Anton Gunawan commenting, delays in several infrastructure projects that have high import components have a positive impact on the financial performance of state-owned enterprises (SOEs). He said the delay in these projects would reduce pressure on the debt ratio.
The impact to the state-owned construction firm like PT Wijaya Karya Tbk (IDX: WIKA), PT Adhi Karya Tbk (IDX: ADHI), PT Hutama Karya, PT Waskita Karya Tbk (IDX: WSKT), PT PP Tbk (IDX: PTPP), and PT Nindya Karya which work on infrastructure projects by short-term and long-term liabilities will be helped by delays in projects.
But on the other hand, he continued, the delay of the projects had a negative impact on national economic growth cause, the construction of these infrastructure projects provides multiplayer effects that have an impact on economic output of Rp2.68 trillion and vice versa.
The NSP was set based on the Presidential decree No. 3/2016, which initially listed 225 projects plus one development program.
