PE investment in Indonesia infra set to increase

Winfried Wicklein, country director for Indonesia at Asian Development Bank, told AVCJ that the country has experienced a rapid increase during the past two years in the number of public-private partnerships under construction and in the pipeline. This is being interpreted as part of a natural maturing process for the sector, which currently relies heavily on support from state-owned enterprises (SOE). 

“The government seems to have employed SOEs quite a bit to expedite the implementation of its ambitious infrastructure agenda. That’s not necessarily a bad thing, as long as project selection and preparation are sound and the private sector is not crowded out,” Wicklein said. “A number of infrastructure SOEs seem to have reached capacity limits, so there’s an increasing effort to seek innovative financing approaches, and at the same time more space for the private sector is opening up.”

Concern around reliance on government backing for infrastructure is based on SOEs’ rapid pace of borrowing. In a report last month, Natixis noted that local SOEs’ ability to repay debt was deteriorating compared to peers in the same sector. However, the investment bank noted that if the national infrastructure push was successful, overall economic growth could exceed its current range around 5% a year to more than 7%.

Infrastructure development, including transportation, energy, and communications installations, is considered an essential component in Indonesia’s overall modernization plans. New technology companies that suffer from scaling challenges in the country’s geographically and economically fragmented landscape have indicated this effort should also include financial infrastructure focused on the inclusion of unbanked people.

Recent private equity activity in this space includes an agreement by Providence Equity Partners to exit its stake in telecom tower platform Komet Infra Nusantara to Profesional Telekomunikasi Indonesia for about $100 million.

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• Topics
• Southeast Asia
• Infrastructure
• Indonesia
• Asian Development Bank