Indonesia set to drop $25b worth of public projects

JAKARTA • Indonesia's chief economic minister has said 14 infrastructure projects, worth 264 trillion rupiah (S$25 billion), are expected to be dropped from the government's strategic development plan due to lack of progress.

Mr Darmin Nasution said these projects will be dropped if they do not meet certain requirements by the third quarter of next year, which is the end of President Joko Widodo's term.

Infrastructure development is one of Mr Joko's main economic platforms as the economy struggles to remove logistical bottlenecks.

Mr Nasution on Monday said the government wants to focus on the 222 infrastructure projects that are still on its list of "strategic projects", with a combined value of around 4,100 trillion rupiah.

Rating agencies have previously warned that balance sheets of state-owned enterprises (SOEs), which have been taking up most of the government's infrastructure projects, have worsened as they took on more debt to fund projects.

"By slowing the pace of implementation, it could mean the government is prioritising infrastructure projects, which may limit contingent liability risk, but have implications for medium-term growth," Moody's sovereign analyst Anushka Shah said ahead of Mr Nasution's announcement.

Moody's upgraded Indonesia to one notch above its lowest investment grade last week. But it said there was a risk of SOEs' financial strength worsening to the point that it could hurt state finances.

S&P cautioned against the same issue last month and Jakarta has said it will monitor SOEs' liquidity risks, especially those in construction and power sectors.

There were also safety concerns that led to the government suspending a number of road and rail construction projects for a short evaluation earlier this year. Among the projects expected to be dropped are railways in Kalimantan and South Sumatra and several airport and sea port projects in Java.

"There are projects that have land (acquisition) problems, investor problems, and even... problems related to the feasibility of the project itself," said Transportation Minister Budi Karya Sumadi.

REUTERS

A version of this article appeared in the print edition of The Straits Times on April 18, 2018, with the headline 'Indonesia set to drop $25b worth of public projects'. Print Edition | Subscribe