BOSTON – Since launching its 2010 Master Plan, Indonesia has amassed a sizable water infrastructure pipeline of 32 public-private partnerships (PPP) requiring over US$2.5 billion of investment in a time of regulatory uncertainty. Following a 10-year hiatus, during which no PPP projects were awarded in the country, two legal decisions in 2015 have shaken the country’s receptiveness to private water investment. In February the Constitutional Court repealed the 2004 Waterworks Law, and in March, Jakarta’s court annulled two concession contracts awarded to private water players PT Air Aetra (Acuatico) and PT Palyja (Suez Environnement). A new Water Law is pending and will be critical to moving the sector forward once legislated.
Bluefield Research has released a new Market Insight, Policy Bottlenecks Challenge Indonesia’s Water PPP Program, that analyzes the current state of Indonesia’s market for new water supply infrastructure investment and provides a near term outlook for development going forward. Indonesia’s water utility segment, increasingly fragmented since decentralization began in 2000, now hosts over 350 firms, of which more than half are not financially viable. While smaller water utilities are short of funds and struggling to meet performance criteria, the upcoming Bandar Lampung water supply project tender will prove to be crucial test for the country’s policymakers and their commitment to the PPP program. The regions of Java and Sumatra present the most developed markets for new PPP opportunities. A selection of international players including Manila Water, Abengoa, and Mitsubishi are showing interest in a market whose large scale and previous PPP experience bodes well in the long term.
“The upside for private participation in Indonesia’s water sector is evident,” stated Phuong Pham, analyst at Bluefield Research. “However, a host of regulatory hurdles must be overcome first to really drive the market forward.”
Policy Bottlenecks Challenge Indonesia’s Water PPP Program is based on Bluefield Research’s ongoing tracking of global public private-partnerships and offers a complete view of the private water sector, including top-down regional trends combined with bottom up company profiles, key data indicators, and competitive positioning in the changing global landscape.