The Indonesian Chamber of Commerce and Industry (Kadin) seeks government intervention to increase private sector participation in water resources infrastructure development.
Bobby Gafur Umar, Vice Chairman of the Industry Sector at Kadin, urges the government to intervene in funding from the banking side, citing that high investment costs make the return of investment (ROI) unattractive.
According to him, investment in water resources infrastructure can be attractive if the investment credit interest rates can be reduced.
“The issue of return of investment can be addressed if there is funding with low costs. Banks always place investment credit as company financing with an 11percent interest rate,” Bobby told Katadata.co.id on Tuesday, May 7, 2024.
Therefore, Bobby considers the suitable scheme of return of investment for water infrastructure projects to be viability gap fund or tariff. Viability gap fund is government support in the form of cash contributions to construction costs. Meanwhile, return of investment with tariff schemes provide certainty to businesses to raise tariffs for a certain period.
Bobby considers water infrastructure projects quite profitable, especially regarding Drinking Water Supply Systems (SPAM). Bobby exemplifies this profit with the investment of the Salim Group in a French Water Company, Suez SA.
Head of the East Kalimantan Regional Settlement Infrastructure Office, Sandi Eko Purnomo, said that the government is currently encouraging private sector participation in water infrastructure projects.
This is evidenced by five Public-Private Partnership (PPP) projects in the Nusantara Capital City (IKN). The five projects are Balikpapan Drinking Water Supply System (SPAM); SPAM Zones 5 and 6 at IKN; SPAM Zones 7, 8, and 9 at IKN; Wastewater Management System (SPAL) in KIPP, and SPAL Zone 5 and 6 at IKN.
The total investment value in all these projects reaches Rp15.92 trillion (US$992 million) with an average return on investment of 13.58 percent. Specifically, the largest investment return value is in the SPAM Zone 5 and 6 IKN project, reaching 16.2 percent.
The investment in this project reaches Rp1.79 trillion and is targeted to be operational by 2026 with a capacity of 1,000 liters per second. Meanwhile, the largest investment value is in the SPAL Zone KIPP project, reaching Rp5.5 trillion.
This SPAL can manage 1,500 liters per second of wastewater with a return on investment rate of 12.2 percent. “The government is assisted by private sector investment, then entrepreneurs can profit from it, while the community can obtain affordable sanitation,” Sandi said.
