In Indonesia, Public-Private Partnership (PPP) is more commonly known as Kerjasama Pemerintah dan Badan Usaha (KPBU). According to Presidential Regulation No. 38 of 2015, KPBU is defined as a collaboration between the Government and Business Entities in Infrastructure Provision aimed at public interest, based on specifications determined in advance by the Minister/Head of Agency/Regional Head/State-Owned Enterprises (SOEs)/Regionally-Owned Enterprises (ROEs). This collaboration utilizes, partially or entirely, the resources of Business Entities while taking into account risk-sharing between parties. The concept of Government-private sector collaboration has been recognized since the New Order era, particularly in toll roads and electricity projects, but it began to be developed further after the 1998 monetary crisis.

The implementation of KPBU in Indonesia was first introduced in 2005 to finance infrastructure projects, marked by the issuance of Presidential Regulation No. 67 of 2005 concerning Government and Business Entity Cooperation in Infrastructure Provision. The Ministry of Finance prepared guarantee instruments through Ministerial Regulation No. 38 of 2006 on Guidelines for Risk Management and Control in Infrastructure Provision as a fiscal support reference. This aimed to provide incentives to attract private sector interest in investing under the KPBU scheme. To facilitate guarantees for KPBU projects, the Indonesian government established PT Penjaminan Infrastruktur Indonesia (Persero)/PT PII as a State-Owned Enterprise (SOE) or Special Mission Vehicle under the Ministry of Finance.

To strengthen policies and institutions, Presidential Regulation No. 38 of 2015 on Government and Business Entity Cooperation in Infrastructure Provision was issued to replace Presidential Regulation No. 6 of 2005. This regulation divides the implementation of KPBU into four stages: Planning, Preparation, Transaction, and Management. Technical guidelines and explanations regarding these stages are outlined in Ministry of National Development Planning (Bappenas) Regulation No. 4 of 2015 concerning Procedures for the Implementation of Government and Business Entity Cooperation in Infrastructure Provision.

The implementation of KPBU continues to undergo updates based on feedback and evaluations from the Government, as the regulator, and Business Entities, as implementers of KPBU projects. A significant recent update was introduced through the issuance of Ministry of National Development Planning (Bappenas) Regulation No. 7 of 2023 regarding Procedures for the Implementation of Government and Business Entity Cooperation in Infrastructure Provision. This regulation anulled the Regulation No. 2/2020 and its amendment, Regulation No. 4/2015. As of now, the said regulation remains the primary reference for both Business Entities and the Government in conducting KPBU processes in Indonesia.

Up to this point, the Indonesian Government has consistently made efforts to optimize the implementation of KPBU to meet investment targets and provide better infrastructure services to the public. It must be acknowledged that the execution of KPBU, which encourages the participation of multiple stakeholders, is inherently complex and tends to require longer implementation times. Moreover, dynamic regulations and policies compel both the Government and private entities to continuously adapt to the latest conditions. Aside from its many difficulties and challenges, reflecting on PPP implementations worldwide, involving the private sector in the planning and development processes has proven highly beneficial. It enhances the quality of public infrastructure services and fosters better urban planning, ultimately benefiting society as a whole.