Private Sector Participation in Infrastructure Projects Deemed Positive for SOE Karya

January 22, 2025 | 01:20 am

TEMPO.CO, Jakarta - Urban planning observer Nirwono Yoga said that the government's move to hand over infrastructure development projects to the private sector could be a valuable opportunity for the State-owned Enterprise Karya, known as BUMN Karya, to improve its financial situation. After years of being burdened by large government projects, BUMN Karya can now focus on completing unfinished obligations without adding new burdens.

"BUMN Karya has carried out large projects such as toll roads, dams, and the Indonesian Capital City (IKN) project with extraordinary pressure. Because they are part of the government, they have no choice but to carry out instructions," Nirwono said when contacted on Tuesday, January 21, 2025.

"With this policy, the BUMN Karya can finally breathe. They can focus on restructuring and improving their finances," he said.

Although this is good news for SOEs, Nirwono said the policy could harm and confuse the private sector. He explained they will face at least three major obstacles in infrastructure projects. First, the land acquisition process, which used to be handled by the government. Now the private sectors have to deal with the issue themselves.

"The obstacle is not only land acquisition, but also government support to speed up the administration. So far, the government has been helping to complete the administrative aspects. If that is lost, the private sector will have to work extra," he said.

Second, the long duration of infrastructure projects. The private sector has to face the risk of changes in government policy on a five-year cycle. "For example, a 20-year toll road contract. What if government policy changes five years later? That is a big risk that the private sector has to calculate," he said.

Third, the financing capacity of the private sector is also in question. Infrastructure projects worth trillions of rupiah are forcing the private sector to rely on foreign loans. The long-term debt is not necessarily in line with their income patterns.

Nirwono also criticized the euphoria of the business community in welcoming the policy. According to him, it showed a lack of understanding of the major consequences they would bear. "Yesterday I saw many people applauding, happy because they were given the opportunity. If you think about it, this is not an opportunity, but a burden," Nirwono said.

Furthermore, Nirwono doubted the private sector's interest after realizing that there was such a big burden after accepting the Prabowo government's offer to build infrastructure. He cited examples such as the construction of the Indonesian Capital City (IKN) and the toll road in Sumatra, which is still struggling to be built. "I am pessimistic. Many of the toll roads in Sumatra have been cut off. Not to mention other projects like dams or new airports. Who wants to take that risk?" he said.

Editor's Choice: President Prabowo Denies Plan to Halt Infrastructure Projects, Focuses on Privatization

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