PROJECTS

Business Process Reengineering for PPPs, Indonesia

The problem

The Government of Indonesia is implementing an ambitious target to develop around 4,000 kilometers of new expressway network, to be financed and delivered through PPP. While rapid progress has been achieved, the government has accumulated considerable contingent liabilities and is now struggling to provide sufficient funding for the rest of the program. The government wanted to improve the approach to prioritizing and funding individual projects for sections of the network.

How we helped

Castalia analyzed all possible avenues to provide additional funding for the expressway program, including land value capture, capital recycling from the re-sale of expiring concessions, and transport-oriented development. We developed detailed projections of the funding required to complete the expressway program and compared it to the existing fiscal commitments and other possible sources of revenue. We confirmed that, with the inclusion of the additional funding sources, the small remaining funding gap could be closed using available fiscal resources. We designed a revolving fund structure that would both enable and incentivize the collection of additional revenues and would allow year-to-year mismatches in funding and costs to be managed through borrowing.

Impact

Indonesia’s government has been given the policy options to fully implement its expressway program via PPP. The government is now working to implement our proposals.