The Indonesian government has decided to use a new financing scheme for the construction of roads, including toll roads. The scheme will be used in the development of roads spanning 500 km, particularly in Sumatra and Papua. The government plans to undertake the construction of roads through a public-private partnership (PPP) mechanism under which investors will construct roads using their own funds and the government will repay them over a period of up to 15 years. The government expects to get good quality services from the investors as they will not be paid if the project is left unfinished or there are construction defects. Investors will be keen to take part in these projects as the infrastructure financing guarantee agency, Penjaminan Infrastruktur Indonesia, will act as a guarantor if the government is unable to pay back construction costs. It will also not strain the state budget because the amount paid to private investors will be the same as the current spending on road maintenance and operation. The cost of construction will take into account interest rates, risks as well as operations and maintenance costs. Bidding for the projects is expected to be opened in 2018.
