“To realize this target, Rp6,445 trillion for infrastructure spending is needed. However, it is projected that the state budget (APBN) can only accommodate 37 percent of the needs, so new alternative financing schemes are necessary,” Deputy for the Coordination of Regional Development and Spatial Planning at the Coordinating Ministry for Economic Affairs Wahyu Utomo explained here on Wednesday.
The government will optimize collaboration with the private sector to meet the needs of infrastructure spending for the 2020–2024 period, he said.
According to him, the government is currently developing strategies and recommendations for alternative infrastructure financing schemes to reduce the burden of equity and State Equity Participation (PMN) through five financing instruments.
The financing instruments include the Government Cooperation with Business Entities scheme; the Limited Rights to Manage scheme; the Sovereign Wealth Fund (SWF), which has been mandated by the Job Creation Law; an integrated funding platform; and the Land Value Capture (LVC) scheme.
LVC can be defined as a policy of utilizing the increase in land value resulting from investments, activities, and government’s policies by using tax-based and development-based LVCs, Utomo informed.
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“The implementation of the LVC scheme in Indonesia is expected to bring various economic benefits, among others, increasing Regional Original Revenues (PAD) through regional taxes and levies, developing organized urban zones, controlling regional economic growth, and conducting economic equality in urban areas,” he said.
Since 2019, the government has been actively conducting studies for preparing regulations and demo project analysis through cooperation with donor institutions, including the World Bank, he added.
“Currently, the regulation draft in the form of a Presidential Regulation, which is expected to be the basis for the LVC scheme implementation has been completed and will go through a harmonization process as the next stage of legalization,” Utomo said.