Infrastructure development and investment needs: new opportunities for Indonesia-China trade and investment relations

Abstract

The government of President Susilo Bambang Yudhoyono's of Indonesia has embarked on a program to develop infrastructure for the next 5 years with total investment funding needed of about US$ 130 billion. Only 17% of this investment need could be funded through government budget, 21% from other domestic sources such as: financial and non-financial institutions while the remaining 62% has to be funded from other sources, including foreign investment. Many of these infrastructure needs to be offered to foreign financing are revenue generating projects. China has a unique position in this case, because China has ample sources of finance to offer, while at the same time China has many needs in terms of energy and natural resources that partly can be fulfilled by Indonesia. Within the above background, the purpose of this paper is as follows: First, the paper will outline the infrastructure financing needs of Indonesia over the period of 2005-2009. Second, the paper will look more deeply into alternative mixture of infrastructure provision between government, private and partnership of government and private. Third, alternative financing scheme will be discussed as it relates to the type of infrastructure and finally, a case of study of new opportunities for Indonesia and China in infrastructure development in West Java Province with possible financing from China through new founding schemes.