Denpasar, 21 May 2024. Indonesia for Global Justice (IGJ) together with the People’s Coalition for Fisheries Justice (KIARA) and Pasraman Air held a parallel discussion session of the People’s Water Forum in Bali with the theme “Behind the Risks of Privatization: The Link between Water Grabbing Issue and Mechanisms Development Financing”. Financing mechanisms in the form of private (privatization) and collaboration between government and private entities or also called as Public Private Partnership (PPP) are currently being implemented on a massive scale, especially in the current government era.
This theme has become a topic that has sparked discussion, where currently the privatization trend is often negative, but current government solutions such as encouraging PPP project financing schemes do not guarantee the welfare of the community. In fact, this financing scheme is seen as the best development solution at the moment. However, in reality there are still many unfair practices that occur at the site level, such as issues of deprivation of rights to water, land, environmental sustainability, health, etc. In fact, this scheme has risk impacts not only at the site level but also has wider impacts such as a country’s fiscal vulnerability.
In this discussion, Komang Audina Permana Putri as coordinator of the debt and sustainable finance program Indonesia for Global Justice saw that there was a relationship between a country’s fiscal vulnerability, such as the increasing value of public debt and the financing mechanism for PPP projects.
“To accelerate infrastructure development in Indonesia, in the past we were very dependent on foreign loans, but this is different from the current situation which is more in the form of Business to Business, namely BUMN which owes money to private parties through a PPP scheme,” said Komang Audina.
“If we look at the composition of Indonesia’s government debt, where foreign debt is decreasing, this is not something to be proud of. However, it is also necessary to examine how our public debt is moving up. Public debt does not consist of just government debt but all forms of debt that are indirectly borne by the public, such as BUMN debt. “The trend of BUMN debt is increasing in line with the government’s current development plans,” stressed Komang Audina.
Many projects result in the Indonesian government having to bear direct financial losses to save public business entities that are in debt, such as capital participation in BUMN. Not to mention, if we refer to the Public Debt Statistics report published by Bank Indonesia, there are still weaknesses in recording BUMN debt at this time, which means the issue of transparency is still high.
However, in various international forums, the trend for PPP financing schemes tends to be to see how this scheme is the best solution. The risks behind it seem to be neatly hidden, especially if the projects designed by the government do not involve civil society in the project planning and preparation process. In fact, often the potential project value obtained is merely used as a reference for the government’s success without adjusting and considering the needs of indigenous communities and the project environment.
Gurnadi Ridwan, FITRA National Secretariat Environment and Natural Resources Budget Manager explained that BUMN debt has now reached 1,640 trillion throughout 2022, in 2023 there will be 7 BUMNs that will be disabled and many BUMNs will experience bankruptcy. This will not only increase the financial burden the state is obliged to bear, but another option is the potential to release business entity assets to the private sector.
“The government should be more careful and filter PPP projects that are in line with community needs and environmental conditions and natural resources which can not only guarantee the sustainability of the project or business but also fairness in the distribution of the benefits of the project, such as the SPAM water management project,” said Komang Audina. “The existence of this PPP scheme is also inseparable from the potential risk of failure to fulfill financial obligations in several projects funded by BUMN and can also have a direct impact on the community in the project area,” explained Gurnadi Ridwan.
Contact Person:
Komang Audina Permana Putri
Coordinator of Debt and Sustainable Finance Issues
Indonesia for Global Justice