Welcoming Private Initiatives in Public Infrastructure Development

The implementation of Public-Private Partnership (PPP) projects, as a collaborative framework between the government and private entities, provides significant opportunities for private enterprises to contribute to, or even initiate, infrastructure development. While PPP projects ultimately serve public interests, private entities can also take the lead in proposing and initiating such projects. Projects initiated by the government are known as Solicited PPP, whereas those initiated by private entities are referred to as Unsolicited PPP. These terms derive from common business proposal practices, where unsolicited proposals are submitted by customers who have not yet explicitly expressed a need for a product or service.

It is essential to note that a Unsolicited PPP does not imply an automatic green light from the government to approve all infrastructure proposals submitted by private entities. The government is obligated to conduct thorough evaluations to ensure the project’s feasibility and economic benefits for the public. Additionally, the government must assess its fiscal capacity to guarantee smooth payment processes and ensure institutional readiness in compliance with relevant policies and regulations.

Optimal implementation of Unsolicited PPP projects relies on well-designed policies and regulations that encourage private entities to submit high-quality project proposals while fostering a more competitive and transparent environment. One critical aspect of Unsolicited PPP is the provision of incentives to proponents, which may include:

- Flexible timelines for private entities to evaluate project feasibility;

- A simpler preparation process compared to PPP Solicited projects;

- Implementation of the “right to match” mechanism for the proponent;

- Additional scoring advantages during the tender evaluation process.

In Indonesia, PPP Unsolicited projects are governed by Presidential Regulation No. 38 of 2015 and Regulation of the Minister of National Development Planning/Bappenas No. 7 of 2023, referred to locally as KPBU Unsolicited. Both solicited and unsolicited KPBU frameworks focus on developing infrastructure projects across 22 identified sectors. The submission process for KPBU Unsolicited begins with the private entity sending a Letter of Intent, followed by the issuance of a Letter to Proceed by the prospective government contracting agency (PJPK). Subsequently, the private entity is authorized to prepare the KPBU Unsolicited proposal in accordance with applicable regulations and policies.

Advantages and Disadvantages of KPBU Unsolicited

A common obstacle in KPBU Solicited projects is the government’s lack of readiness to act as the proponent, which often leads to bottlenecks during the planning or preparation stages. In KPBU Unsolicited projects, the initial responsibility lies with the private proponent, including preparing the required feasibility study documents to assess the project’s viability. This provides private entities with greater flexibility during the preparation phase, allowing them to ensure the project is financially and technically feasible. However, both KPBU Solicited and Unsolicited approaches have distinct advantages and limitations, which must be carefully considered by both the government and private entities when undertaking a KPBU project.

One notable example of a KPBU Unsolicited project is the Dhoho Airport Project in Kediri, which began operations in 2024. This project was a collaboration between the Ministry of Transportation and PT Surya Dhoho Investama. The partnership agreement was signed in September 2022, and the airport commenced operations in April 2024. With an estimated investment value of IDR 10.8 trillion and a 50-year concession period, the project is recognized for its efficient process from preparation to operation.

For KPBU Unsolicited projects to run smoothly, several aspects require attention. On the government’s side, there must be robust policy and regulatory support, as well as an effective monitoring and evaluation process. Implementing Business Entity, meanwhile, must ensure their technical and financial readiness to act as executing agencies for the project.

Ultimately, deciding which party should initiate a KPBU project depends on the specific circumstances and conditions of both parties. Therefore, early and effective communication between the government and private entities is crucial to determine the best approach for ensuring project success