A. The Urgency of Infrastructure and Its Financing Schemes
As an archipelagic nation with a vast geographical landscape and the world's fourth-largest population, infrastructure development in Indonesia is a critical and urgent necessity. Infrastructure development, especially outside the island of Java, remains uneven. For this reason, the Government is focusing on equitable infrastructure development to realize one of its national goals: improving the welfare of the Indonesian people. It is hoped that through infrastructure development, the public will experience numerous benefits and conveniences.
The availability of infrastructure also influences the economic activity chain. Adequate infrastructure helps communities in a region to develop, stimulates business activities, opens up broad access, and smooths the flow of distribution to the area. Infrastructure improvements contribute to increasing productivity and are expected to support long-term economic growth. Infrastructure plays a vital role in boosting economic growth, where higher growth is found in regions with sufficient infrastructure availability.
Besides aiming to meet public needs and drive economic growth for the community's welfare, the government's infrastructure development is also a form of long-term investment. Although the costs are substantial, the benefits of this infrastructure can be felt by the public for years to come. Moreover, current infrastructure financing models can be advantageous as they attract investors.
One of the obstacles to uneven infrastructure development in Indonesia is the limitation of the State Budget (APBN) in financing designated projects, leading to a funding gap that must be filled. To address this, the Government has introduced several alternative financing innovations, one of which is the Public-Private Partnership (PPP) scheme.
In Indonesia, a PPP is defined as a collaboration between the Government and a Business Entity in providing infrastructure for the public interest, based on specifications previously determined by a Minister, Head of an Institution, Regional Head, State-Owned Enterprise (BUMN), or Regional-Owned Enterprise (BUMD). This collaboration utilizes some or all of the Business Entity's resources, with careful consideration of risk-sharing between the parties. The Government issued Presidential Regulation No. 38 of 2015 concerning Public-Private Partnerships in Infrastructure Provision.
Amidst the Government's budget constraints, the PPP scheme has begun to be applied to several projects in Indonesia, including in the telecommunications sector. In this digital era, the telecommunications system demands a strong internet network that connects all islands in Indonesia. This has prompted the Government to find new intermediary technologies that can facilitate powerful internet connectivity, namely through fiber optic networks and satellites.
Through the Ministry of Communication and Informatics (Kominfo) and PT Penjaminan Infrastruktur Indonesia (PT PII)—one of the Ministry of Finance's Special Mission Vehicles (SMVs)—the Government is implementing development and providing guarantee facilities for the Palapa Ring and Government Multifunction Satellite Projects under the PPP scheme. These projects are a tangible manifestation of the Government's effort to build a fiber optic network service connecting all districts and cities and to equalize internet connectivity through broadband and satellite access, especially in the Outermost, Disadvantaged, and Frontier (3T) areas of Indonesia.
The Palapa Ring project—divided into three packages: West, Central, and East—is a backbone network development project designed and implemented using a Submarine Cable Communication System and a Fiber Optic Communication System to provide high-speed internet access to 57 underserved cities/districts.
The Palapa Ring and Government Multifunction Satellite projects represent Kominfo's commitment to developing and accelerating the growth and equalization of socio-economic development through the availability of large-capacity information and internet network infrastructure. This infrastructure supports government activities, promotes equality in education and health, alleviates poverty, addresses environmental issues, and drives the economy in potential regions, with benefits felt by all Indonesian people.
B. Understanding the Public-Private Partnership ("PPP") Scheme
A Public-Private Partnership (PPP), known internationally as a Public Private Partnership, is an alternative infrastructure financing scheme (creative financing) that involves the private sector in carrying out some government functions. Unlike privatization, where the entire project is privately owned, a PPP scheme is fundamentally a cooperation agreement between the Government and a Business Entity based on risk allocation. The private party, referred to as the Business Entity in this scheme, handles the financing, design, construction, operation, and maintenance of the infrastructure for a specific period (the concession period). The infrastructure that is built and operated will then be returned to government ownership at the end of the concession. In return for its involvement, the private sector is entitled to a return on its investment through a method previously agreed upon with the Government.
Availability Payment is one of the investment return schemes where the private party receives periodic payments from the Government based on achieving agreed-upon service performance levels, known as a Service Level Agreement (SLA).
Comparison between Conventional (State/Regional Budget) and PPP Availability Payment Infrastructure Financing
The application of the PPP scheme allows the Government to provide infrastructure without having to allocate a large amount of funds at the beginning of the project. This advantage gives the Government room to allocate its fiscal capacity for other uses, thereby accelerating infrastructure provision productivity and stimulating earlier economic growth.
Implementing a PPP gives the Government access to the best available resources. With its existing limitations, the government can leverage the resources, experience, knowledge, and expertise of the private sector to provide the best services to the public. Below are various other benefits of implementing the PPP scheme for infrastructure provision.
Essentially, the PPP scheme is used as an effort to share risks between the Government and the Business Entity by allocating risks to the party that can manage them better. Meanwhile, the objectives to be achieved from implementing the PPP scheme are as follows:
Diagram of PPP Scheme Implementation Objectives
C. Value for Money (VfM) as the Basis for Using the PPP Scheme
The use of the PPP scheme for infrastructure provision is essentially to obtain a better Value for Money (VfM) compared to conventional provision through the State/Regional Budget. In the planning and preparation stages of a PPP infrastructure project, the Government must ensure that the application of the PPP scheme can provide better Value for Money. This aims to ensure that the money from public tax revenues is utilized as effectively as possible by the Government in providing services to the public.
In a conventional scheme, the Government is responsible for all risks that arise in infrastructure provision, whereas in a PPP scheme, the government can transfer risks to the private sector. In procuring infrastructure, it is natural for the private sector to seek profit. The higher the risk transferred to the private sector, the higher the risk premium, or the amount the private sector assigns to absorb that risk, which can reduce the VfM of the PPP project. Therefore, risks in a PPP infrastructure project must be allocated to the party that can manage them most effectively to achieve maximum value.
On the other hand, the resources, experience, and expertise of the private sector in conducting its business have the potential to generate better cost efficiency compared to implementation by the Government, thereby providing better value to the public.
D. Infrastructure Guarantee through PT Penjaminan Infrastruktur Indonesia (Persero)
PT Penjaminan Infrastruktur Indonesia (Persero) ("PT PII"), also known as the Indonesia Infrastructure Guarantee Fund (IIGF), is a State-Owned Enterprise (SOE) under the Ministry of Finance, established to implement the Indonesian Government's Single Window Policy for managing infrastructure guarantee facilities provided for PPP projects. The establishment of PT PII is one of the Government's efforts to support the acceleration of infrastructure development in Indonesia by providing guarantees through an accountable, transparent, and credible process.
In a PPP agreement, PT PII acts as the guarantor on behalf of the government. When a breach of contract occurs due to government action or inaction, the private party can make a financial claim to PT PII for a value as agreed upon in the Guarantee Agreement. In the event of a claim, the Contracting Agency is obliged to reimburse PT PII for the amount paid out.
The presence of a government guarantee through PT PII plays a crucial role in providing comfort and increasing the investment appetite of the private sector. Through government guarantees for infrastructure projects, it is hoped to enhance the creditworthiness of PPP projects, thereby reducing the project's cost of funds and encouraging the inflow of private funding into Indonesia's infrastructure sector.
PT PII guarantees various infrastructure risks, primarily political risks, which may arise from government actions or inactions that could cause financial loss to the PPP project, such as delays in permit processing, changes in laws and regulations, failure to adjust tariffs, failure to integrate networks/facilities, and other risks.
In carrying out its duties, PT PII conducts project evaluations, structures guarantees, and processes claims for PPP projects with the aim of lowering the development costs of PPP infrastructure, enhancing project quality and credibility, and helping the government to better manage infrastructure risks.
E. The Added Value of PT PII's Guarantee in PPP Projects
For the government as the project owner, the benefit of the guarantee is that it increases the certainty of private participation and financing for Indonesia's infrastructure development. PT PII can also assist the government in creating a sound transaction structure, thereby increasing the certainty of successful transactions with investors, which ultimately leads to the certainty of high-quality and efficient infrastructure development.
For the private sector, the guarantee reduces political risk exposure in the eyes of investors and creditors, which can lead to a decrease in the financing costs that must be borne for the infrastructure investment.
PT PII, as an Infrastructure Guarantee Business Entity (BUPI), also assists the central government, in this case the Ministry of Finance, in ring-fencing the Government's contingent liabilities and minimizing direct "sudden shocks" to the State Budget from government infrastructure projects, in accordance with relevant laws and regulations.
The urgent need for national infrastructure development to support Indonesia's economic growth faces the constraint of limited budgets. Therefore, through Presidential Regulation No. 38 of 2015 concerning Public-Private Partnerships in Infrastructure Provision, the Government has encouraged the application of the PPP scheme to facilitate private participation in national infrastructure provision. This is further strengthened by Government support through policies, instruments, and fiscal frameworks to increase appetite and thereby encourage private participation in national infrastructure development.
The application of the PPP scheme is essentially intended to meet funding needs sustainably for infrastructure provision by mobilizing private funds, to realize the provision of quality, effective, efficient, well-targeted, and timely infrastructure, and to create an investment climate that encourages the participation of Business Entities in infrastructure provision.
Based on this regulation, the Government, through the Contracting Agency (PJPK), enters into a contract with a private party to deliver a PPP project. As a continuation of the Government's commitment to encourage private sector roles in infrastructure projects, the Government then established PT PII to protect PPP projects from risks caused by the PJPK. PT PII was formed to increase certainty for the private sector when investing in infrastructure projects, which is ultimately expected to contribute to improving the investment climate, business confidence, competitiveness, and sustainable economic growth.
One application of the PPP scheme for infrastructure development in Indonesia is by the Ministry of Communication and Informatics (Kominfo). Amidst the era of telecommunications system digitalization, a strong and interconnected internet network between islands in Indonesia has become a primary need. This has prompted Kominfo to find new intermediary technologies that can facilitate powerful internet connectivity, namely through fiber optic and satellite networks.
The Government, through Kominfo, is building the Palapa Ring and the Government Multifunction Satellite with a PPP scheme as one of the government's efforts to build the availability of fiber optic network services connecting all districts or cities and also for the equitable distribution of internet connectivity through broadband and satellite access, especially in the 3T regions of Indonesia.
In realizing the Palapa Ring, the Minister of Communication and Informatics signed a cooperation agreement on February 26, 2016, for the Palapa Ring West Package Project with the Implementing Business Entity (BUP) PT Palapa Ring Barat (a consortium of Moratel – Ketrosden Triasmitra). This cooperation agreement also included the signing of a Guarantee Agreement between PT PII and PT Palapa Ring Barat and a Recourse Agreement between Kominfo and PT PII, which serves as the single window policy implementer for providing Government guarantees for infrastructure projects in partnership with the private sector.
Continuing on March 4, 2016, Kominfo, as the PJPK for the Palapa Ring Central Package project, signed a Cooperation Agreement with PT Len Telekomunikasi Indonesia as the BUP. This cooperation also involved the signing of a Guarantee Agreement between PT PII and PT Len Telekomunikasi Indonesia and a Recourse Agreement by Kominfo with PT PII.
Subsequently, on September 26, 2016, a Cooperation Agreement was signed for the Palapa Ring East Package Project between Kominfo as the PJPK and PT Palapa Timur Telematika (PT PTT) as the BUP, formed by a consortium of Moratelindo, IBS, and Smart Telecom. A Guarantee Agreement was also signed between PT PTT and PT PII, as well as a Recourse Agreement between PT PII and Kominfo.
After the Palapa Ring project signings, Kominfo again signed a cooperation agreement for the PPP Government Multifunction Satellite project on May 3, 2019, between Kominfo as the PJPK and PT Satelit Nusantara Tiga as the BUP. The signing of the Guarantee Agreement was conducted between PT PII and PT Satelit Nusantara Tiga as the BUP, which was then followed by the signing of a Recourse Agreement between PT PII and Kominfo.
The Palapa Ring, divided into three packages—West, Central, and East—with a total cable length of 10,851 km, is one of the backbone network development projects designed and implemented using a Submarine Cable Communication System and a Fiber Optic Communication System to serve 57 previously unserved cities/districts. The project is targeted to distribute a broadband network with speeds of 10 Mbps in rural areas and 20 Mbps in urban areas.
The Palapa Ring is the first PPP project in the telecommunications sector to implement the Availability Payment (AP) scheme. The availability payment scheme was initiated by the Indonesian Ministry of Finance, with its funding sourced from the Universal Service Obligation (USO) Contribution Fund. All three Palapa Ring project packages have now entered the operational stage.
Meanwhile, the Government Multifunction Satellite project is the fourth telecommunications PPP project developed by Kominfo to expand fast and high-quality telecommunication and information services, addressing the connectivity gap in public government services throughout Indonesia, especially in the 3T and border areas. This project has a capacity of 150 Gbps using High Throughput Satellite (HTS) technology with the Ka-Band frequency.
In developing the Palapa Ring and the Government Multifunction Satellite, Kominfo is supported by the Ministry of Finance through its SMV, PT PII, as the single window policy for Government Guarantees using the PPP scheme. PT PII actively contributes to assisting the Government, in this case, the Ministry of Finance and Kominfo, in implementing the Government's work program through the acceleration of quality infrastructure provision that provides maximum benefit to the community with affordable infrastructure services and reduces the burden on the State Budget through PT PII's Guarantees. The development of the Palapa Ring and the Government Multifunction Satellite with a PPP scheme by Kominfo is an innovative effort to build infrastructure without using debt financing.
Indonesia's outermost and frontier regions, such as remote and border areas, often face difficulties in obtaining adequate telecommunications access. The high cost of telecommunications access in the 3T regions makes it difficult for the community to access information and basic services.
This is where a telecommunications backbone in the form of a fiber optic network connecting all regions of Indonesia is needed. The Palapa Ring project originated from an idea proposed at the Indonesia Infrastructure Summit (IIS) in Jakarta in 2005 to meet the need for fast, high-quality, and evenly distributed data and internet telecommunications access throughout the archipelago. This backbone concept is known as the Palapa Ring, derived from the Palapa Oath of Patih Gajah Mada, who vowed to unite the archipelago. The Palapa Ring has been developed by Kominfo and BAKTI since 2016, divided into 3 stages: Palapa Ring West, Central, and East.
The Palapa Ring, designed using a combination of approximately 12,000 KM of submarine cable deployment and the modification of several microwave landing stations, is designed to cover the remaining 57 cities/districts not yet served by a telecommunications network. In the 2015-2019 National Medium-Term Development Plan (RPJMN), this project was included in the target of "Strengthening National Connectivity to Achieve Development Balance" and was designated as a National Priority Project.
The main benefit of the Palapa Ring is to support the availability of fixed and mobile telecommunication networks, both for data and voice, that are fast, stable, high-quality, and accessible to the public. Furthermore, the Palapa Ring also supports real-time services such as distance education (tele-education), e-government, and distance health teaching (tele-health) at low cost, as well as TV broadcasting and internet reaching remote villages.
The Palapa Ring requires significant investment and technological complexity that cannot be adequately financed by the State Budget. On the other hand, the Palapa Ring was not seen as having sufficient commercial potential. Considering it as a form of equitable welfare for communities in the 3T regions and its high socio-economic benefits, Kominfo decided to use the PPP scheme to build the Palapa Ring, inviting private sector participation and investment. The Palapa Ring is the first telecommunications project developed with a PPP scheme.
Private sector participation in the development of fiber optic networks for broadband services is greatly needed, given that Kominfo currently lacks the resources in both technology and human capital. Kominfo acts purely as a regulator in the provision of ICT access networks and services.
As a National Priority Project, the Palapa Ring receives support and coordination from various stakeholders, both at the central level (Kominfo, BAKTI, Ministry of Finance, Ministry of National Development Planning/Bappenas, Ministry of Environment and Forestry, Coordinating Ministry for Economic Affairs, BKPM, and LKPP) and at the regional level.
BAKTI is a non-echelon organizational unit within Kominfo that applies the financial pattern of a Public Service Agency (BLU), under and responsible to the Minister of Communication and Informatics. BAKTI's task is to manage the financing of the Universal Service Obligation (USO) and the provision of telecommunications and informatics infrastructure and services. In its efforts to equalize the use of telecommunication services, BAKTI carries out major programs, including the Palapa Ring PPP project, Internet Access Provision, BTS Provision, and the Multifunction Satellite PPP project.
The Palapa Ring uses the Availability Payment ("AP") scheme, with the source of payment being the Universal Service Obligation Contribution, often known as the USO Fund, which is currently managed by Kominfo's BLU, namely BAKTI. AP is a periodic payment by the PJPK to the Implementing Business Entity for the availability of infrastructure services that meet the quality and/or criteria as specified in the PPP agreement.
F. Project Cooperation Structure
PPP Structure and Transaction Scheme for the Palapa Ring Project under the Availability Payment Mechanism.
The Minister of Communication and Informatics, as the PJPK, signed a Cooperation Agreement with the Implementing Business Entity as the basis for the management cooperation of the Palapa Ring during the 15-year concession period after the Palapa Ring's operational date. The main obligation of the Business Entity is to build the fiber optic network facilities and operate them during the concession period before handing them back to the Government.
BAKTI is obliged to make payments for the PJPK's financial obligations periodically to the Implementing Business Entity using AP. Under the AP scheme, the Access Charges received from network users become BAKTI's revenue, which is then used to pay the AP to the Business Entity. PT PII provides a Government guarantee for the PJPK's financial obligations to the Palapa Ring Business Entity, which is regulated through a guarantee agreement with the Business Entity and a recourse agreement with the Minister of Communication and Informatics.
The risk allocation for the Palapa Ring, which serves as a reference for the cooperation and PT PII's guarantee, is as follows:
The Government guarantee provided by PT PII for the Palapa Ring is a form of fiscal support from the Ministry of Finance for PPP infrastructure projects, covering risks that are the responsibility of the Government in the form of the PJPK's financial obligations to the Business Entity.
The Palapa Ring required a planning, preparation, and transaction period of approximately 1 year and 3 months for the West and Central packages, resulting in the selection of the winning Business Entities: the Moratel consortium for the West and LEN for the Central. The PPP cooperation was formalized through cooperation, guarantee, and recourse agreements in 2016. The East package was finalized with the selection of the Moratel consortium and formalized through the signing of cooperation, guarantee, and recourse agreements.
The Palapa Ring West and Central packages entered their operational period in 2018. Meanwhile, the Palapa Ring East package began its operational period in August 2019.
G. Keys to Palapa Ring's Success
Kominfo, as the PJPK, and BAKTI demonstrated very strong commitment in every stage of the PPP process, from planning and preparation to the transaction phase. The PJPK's readiness with project documentation and their understanding of the PPP process and scheme were key factors, including the support of a dedicated PJPK PPP team for the project. PT PII actively conducted capacity-building activities with the PJPK to ensure a comprehensive understanding of the project within the Kominfo and BAKTI PPP teams.
The active role of involved stakeholders was an equally important aspect. Kominfo actively conducted outreach and communication and collaborated with Ministries/Institutions and, crucially, with the Regional Governments where the project would pass through and operate.
In project preparation, the PJPK was also supported by the capabilities of consultants in related aspects such as technical, financial, legal, transactional, and environmental matters. The certainty of the Palapa Ring's implementation and timeline, especially during the construction and operational phases, was made more effective by the formation and involvement of a Joint Monitoring Committee, which assisted the PJPK and the BUP in resolving issues encountered.
H. Stakeholder Support for the Project
The successful implementation of the Palapa Ring and Government Multifunction Satellite PPP projects cannot be separated from the role of various related stakeholders who were actively involved from project preparation, conducting the tender for the Implementing Business Entity, to financial close and the construction and operational phases. BAKTI, acting on behalf of the PJPK, was actively involved from the planning, preparation, and procurement phases and is responsible for payments to the BUP for service availability during the project's operational phase. The following are the parties that actively supported the development of the Palapa Ring project.
I. Economic Benefits of the Kominfo Sector PPP Infrastructure Project
Through the Ministry of Communication and Informatics (Kemenkominfo), the Government is developing the Palapa Ring and Government Multifunction Satellite infrastructure projects to accelerate the growth and equitable distribution of socio-economic development. This is achieved through the availability of large-capacity information and internet network infrastructure to support government activities, poverty alleviation, environmental issues, drive the economy in potential regions, and promote equitable education and healthcare, with benefits that can be felt by the Indonesian people.
Improving community welfare is a common paradigm for providing infrastructure. Referring to this, the provision of infrastructure by the Government itself must have a basis in the significance of the economic and social benefits it can generate. Therefore, infrastructure projects with significant potential benefits, both direct and indirect, for improving community welfare are prioritized for implementation.
In its guarantee process, PT PII conducts an economic feasibility analysis of the project as well as an economic impact analysis to assess a project's viability. From PT PII's economic feasibility analysis for the Palapa Ring and Government Multifunction Satellite projects, various potential benefits from the availability of these two infrastructures were identified. Nevertheless, the output of this analysis does not preclude the existence of other potential benefits beyond those analyzed. The following are the results of the economic feasibility analysis conducted by PT PII.
I.1. Palapa Ring Project
The results of the project's economic feasibility analysis (evaluated by PT PII during the guarantee appraisal stage in 2015) show that the availability of broadband access due to the Palapa Ring will have an impact on the economy in various forms, such as increased productivity, competitiveness, job creation, and improved quality of life for the community, while also facilitating growth by accelerating the distribution of ideas and information.
Some of the identified impacts of this project are as follows:
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Increase in Regional Gross Domestic Product (RGDP): Based on a World Bank study, low-income and middle-income countries experience an RGDP increase of 1.38 percentage points for every 10% increase in broadband penetration. The Palapa Ring is estimated to increase RGDP in its service areas by 4.5% to 6.4% within 10 years.
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Creation of New Jobs: The availability of broadband resulting from the Palapa Ring infrastructure will create jobs in three groups: (1) direct jobs related to broadband infrastructure construction, (2) indirect jobs created due to activity (1), and (3) additional new jobs resulting from the externalities of the broadband network. With broadband available to 2.5 million users by 2028, the Palapa Ring is estimated to create around 200,000 jobs within 10 years.
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Savings in Business Operating Costs: With broadband and IT infrastructure in the form of hardware, software, and technical support, business costs can be significantly reduced with cloud computing technology. This technology can increase the efficiency of resources needed to achieve business targets.
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Expansion of Market Reach in the Retail and Service Sectors: The presence of broadband will enhance the ability to acquire new customers and maintain relationships with existing ones, which is very important for the retail and service sectors.
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Efficiency in the Manufacturing and Industrial Sectors: Broadband allows companies to more efficiently manage supply chains by automatically transferring and managing purchase orders, invoices, financial transactions, and other activities. Since the manufacturing and industrial sectors have been the main drivers of overall economic growth in developing countries for the past 20 years, broadband is expected to play a crucial role in increasing productivity in these sectors.
In addition to the points above, the availability of broadband also has a positive long-term impact on the education, health, governance, and environmental sectors.
I.2. Government Multifunction Satellite Project
Based on the project's economic feasibility analysis evaluated by PT PII during the guarantee appraisal stage in 2018, the presence of the Government Multifunction Satellite provides benefits in the form of cost efficiency in governance. This satellite will become an enabler for the Government in the 3T regions to provide public services by utilizing information technology.
Some of the identified impacts of this project are as follows:
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Benefit of Internet Cost Savings: There were approximately 149,400 points in Indonesia at the time of this project's initiation that were not connected to the internet (offline). These points are the main targets for connection by the Government Multifunction Satellite. Based on PT PII's project data in 2018, with an assumed 3% per year increase in internet connectivity from these unconnected points, it is estimated there will be savings from transponder leasing over 15 years of around IDR 29 trillion.
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Savings from Use by Government Institutions: The availability of an internet network in previously unconnected locations will make it highly possible for the Government in these regions to implement e-government, which is one of the Government's development priorities. The use of e-government is estimated to generate savings of around IDR 4 trillion from government budget usage. Furthermore, the implementation of e-government brings several benefits. First, an improvement in the quality of services to the public; savings for the public through faster, easier, and more convenient services, especially with reduced service times. There are also benefits in the form of direct cost savings related to public services, such as paper and printing costs.
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Benefits from the Use of e-Education: Internet access will help about 94,000 schools at the service points to implement the Computer-Based National Examination (UNBK). Based on project data in 2018, the average cost saving from transitioning from paper-based to computer-based national exams is IDR 2.6 million per school/year. This assumption is based on cost savings data reported by 30,000 schools in 2016. Using an inflation rate of 4% per year, the average saving is estimated to be IDR 3 million per school per year by 2023. Thus, the total savings over 15 years are estimated to reach IDR 6.4 trillion.
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Benefits from the Use of e-Healthcare: The internet network will assist health services in improving the quality of procedures and saving administrative costs related to billing for patients, insurance, and others. Based on 2018 project data, over 15 years, the value of savings is estimated to reach IDR 59.3 billion.
Separately, in the Economic Impact Analysis of the Project ("project impact study") conducted by PT PII with assistance from the Institute for Economic and Social Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI), it was found that the infrastructure project has a positive impact on the economy and society, both directly and indirectly.
Direct benefits from the development of the telecommunications network system include savings in business costs, business development for the retail & service sectors, supply chain management efficiency for the manufacturing and industrial sectors, long-term benefits for the education, health, e-Government, and environmental sectors, savings in internet costs, and savings in access costs by users. Meanwhile, from the analysis of the Palapa Ring (3 Packages), the indirect benefit value during the project's concession period is an economic value-added (GDP) of 0.011% or IDR 15 trillion; an increase in household income of IDR 4 trillion; and the creation of 483,000 person-years of employment.
J. Impact of Internet Infrastructure Projects on Sustainable Development Goals (SDGs) Targets
Based on the project impact study, the provision of broadband internet network infrastructure aimed at connecting all offline areas in Indonesia, especially in the 3T regions (disadvantaged, frontier, and outermost), through the implementation of the Palapa Ring and Government Multifunction Satellite PPP projects has a relatively large public service obligation element. With the implementation of these projects, the Government aims to provide more equitable access to information for people living in these 3T areas.
The internet network, as a means of information exchange, has the potential to help improve the standard of living for people in the 3T regions. For example, with fast and affordable internet access, the community can benefit in several ways as illustrated in the following diagram.
Inclusive access to the internet is also believed to have a significant indirect impact on several aspects, as shown in the following figure.
Meanwhile, the positive impacts that can be directly felt by the community in the form of inclusive internet access in the trade, economic growth, and information sectors also play a role in alleviating poverty (Goal #1, No Poverty) and can reduce social inequality (Goal #10, Reduced Inequalities).
For example, people who do not have internet access have limited ability to obtain information about opportunities for free college education through the Bidik Misi program. Thus, having internet access helps people get information about these scholarships (creating equality among people to get opportunities for free higher education).
Regarding environmental issues, the presence of the internet, which contains a variety of information about the causes and impacts of climate change on people's lives, can help raise public awareness about the importance of preserving the environment (Goal #13, Climate Action).
Furthermore, access to the internet can make it easier for grassroots communities to voice their concerns about activities that cause environmental issues in their surroundings and to create movements to collectively address these issues (Goal #17, Partnerships for the Goals).
The presence of the Palapa Ring and the Government Multifunction Satellite provides an opportunity for the Government to improve its services to the public. For example, with these two infrastructures, the Meteorology, Climatology, and Geophysics Agency (BMKG) can provide accurate real-time information on weather and climate that is accessible to the population, especially fishermen sailing in the 3T regions. The public can also access information for faster disaster response from the central and regional National Disaster Management Agency (BNPB).
The Palapa Ring and the Government Multifunction Satellite are forms of Government service to the community through access to communication and internet information, thereby promoting information transparency and accelerating services from various government agencies to the public, from urban and rural areas to remote islands.
K. Conclusion
The presence of the Palapa Ring and the Government Multifunction Satellite is a realization of the mandate given to the Government for the equitable distribution of telecommunication services in Indonesia.
The presence of adequate telecommunications infrastructure not only provides direct impacts, such as savings in government administration budgets, but also indirect impacts, such as the availability of business opportunities for the community based on digital services, which will contribute to the nation's economic growth.
The application of the PPP Availability Payment (AP) scheme has given the Government the opportunity to provide infrastructure without having to wait for a long time, increasing productivity and encouraging economic growth. The application of the PPP AP scheme in these two projects is an example that the involvement of the private sector is very possible for the fulfillment of Government obligations.
In its implementation, a PPP project should be well-prepared to provide certainty of information to increase the appetite of the private sector to invest in an infrastructure project. The commitment and capability of the PJPK are among the main keys to the successful implementation of a PPP project.
Reflecting on the experience of these two Kominfo projects, it shows that providing infrastructure with innovative financing, in this case, the PPP scheme, is very feasible for the Indonesian Government to implement. Budget limitations are no longer a constraint in the Government's efforts to provide infrastructure. High productivity in infrastructure provision will encourage the creation of better economic growth for the Indonesian nation.
It is hoped that the implementation of the PPP scheme in the Palapa Ring and the Government Multifunction Satellite can become a reference model for the application of infrastructure provision through the PPP scheme in Indonesia. This way, the advantages of this scheme can be utilized by subsequent PPP projects within the Indonesian Government, especially in the telecommunications sector, leading to more efficient budget use and providing the widest possible benefits to the community in heading towards the digital era.