Lukas B. Sihombing

Financial Innovation for Infrastructure Financing

According to PPI World Bank Database that infrastructure investment in East Asia (China, Indonesia, Philippine, Malaysia, and Thailand) from 1998 to 2005 was stagnant, where infrastructure investment in Indonesia slowed down after financial crises, total investment in 1996 was 7,492.6 million US dollar but in 2000 fell down to 642.3 million US dollar and in 2005 raised on 1,445 million US dollar. To create a more efficient and encourage the growth of infrastructure investment market, infrastructure financing needs a financial innovation. The potential of innovation in infrastructure financing which will be researched is a new financial product. What will be a new financial product in infrastructure financing? Therefore, the board aim of this study is to analyze the potential for, and the impact of, innovation in the financing, funding and procurement of infrastructure and to spread knowledge of innovation techniques to relevant parties with interests in Indonesia. The specific objectives arising from that aim were to: critically review existing models of finance, funding and appraisal in the infrastructure in the light of changing business requirements; survey recent innovative financial products, vehicles and funding techniques in infrastructure investment markets; examine case studies of innovative finance and procurement methods to illustrate the potential (and pitfalls) of the new techniques; draw lessons from developments in United State of America, China, Malaysia, and Thailand markets; consider likely future trends in the infrastructure market and assess the interaction between innovation and public policy. A Vector Auto-regressive (VAR) or econometric method will be employed to estimate effect of infrastructure investment on the economy.

The Impact of Land Acquisition Delay in Toll Road Development

The development of toll road infrastructure in Indonesia is very decelerate where from 1500 km that was planned in 2006, but the realization is only 749,12 km operation in 2010, meanwhile the land that will be acquisited in Trans Java toll road is 6,272.84 Ha, but only 1,400 Ha have been acquisited. From the facts above that land acquisition is very significant point in toll road development. There are many efforts how to mitigate these risks such as land capping revolving fund, but this effort still meeting constraints. At this paper, we try to examine how the impact of land acquisition delay in toll road infrastructure development in Indonesia with system dynamic method, so we can see what their impact to toll road development.

Analyzing the uncertainty of toll road land acquisition using program uncertainty management

Land acquisition is one of the most important activities in construction, particularly in toll road development. Many toll road projects in Indonesia have not been completed and many investors have become bankrupt because of unresolved land acquisition issues. The problem of land acquisition in Indonesia is due to uncertainty and very complex issues. In fact, land prices can be 10 times until 20 times higher, and construction costs can far exceed the original costs. Therefore, this paper aims to create a new value for stakeholders and organizations that handle negative uncertainties that can waste a large amount of investment in money using program uncertainty management. The results of this paper detail the process and analysis of program uncertainty management for land acquisition uncertainty in the case of Indonesian toll roads.

Financial Innovation for Toll Road Infrastucture Development

The development of toll road infrastructure in developing countries included Indonesia still slow down. There are many problems to build toll road infrastructure, one of them is financing. The need of toll road infrastructure investment in Indonesia is Rp66,751.95 Billions to build 768.65 km of toll road, and need Rp10,267.37 Billions at Batch 2 and 3 in still bidding preparation to build 154.24 km, and also need Rp7,492.47 Billions to build 125.42 in Batch 4 of toll road, and other toll road is 877.09 km which is need the investment is Rp99,065.15 Billions, so the total of toll road investment financing is Rp216,828 Billions to build 3,087.88 km of toll road. But the Government of Indonesia provide only Rp6,578.70 Billions to participate to build 70.51 km of toll road, there is a gap financing is around 3% between government and private investor. At this paper, we want to introduce what is financial innovation, what is the function of financial innovation that can accelerate and expand toll road investment, what is the impact of toll road financial innovation that can increase economic growth, and how to use financial innovation for toll road infrastructure development. And we conclude that financial innovation is the method to accelerate and expand toll road investment in Indonesia, and increase economic growth; and also this method can use to other developing countries.

The Risks of Toll Road Infrastructures in Indonesia

The development of toll road infrastructure in Indonesia is still slow down, if we compare the growth of toll road before crisis from 1978 until 1998 was 13.66% and after the crisis from 1999 to 2010 was 2.14%. Otherwise, the length of toll road in Indonesia until now has 742 km, operated by State Owned Enterprise (Jasa Marga) is 78% and private is 28%.The fact of that data above that toll road investment in Indonesia is not interesting to private investor because investment in toll road development riskier than other infrastructure investment. At this paper, we try to explain the development and toll road infrastructure risks in Indonesia.

Toll Road Infrastructure Length and Productivity Growth: Evidence from the Java Island Goods-Producing Sector

This paper investigates the role of toll road length in Java Island goods production. Province-wide production function (DKI Jakarta, West Java, Center Java, DI Jogjakarta, East Java and Banten) using Cobb-Douglas and translog functional forms with toll road length, construction capital and labor as the three inputs are estimated. Production functions are estimated using standard techniques to control for unobserved province and time specific characteristics based on pooled cross-section data for 6 Java Island provinces over the period 2002-2009. The issues of nonstationarity data is recognized and appropriate adjustment is made. Output elastitisities of toll road length has a positive contribution on provincial goods-producing output. This relationship holds for various specifications of the error structure and functional forms. Toll road length and construction capital are found to be substitutes. Toll road length and labor are found to be complements. The size and significance of the estimates very depending on specifications of the error structure and on the use of functional forms.

The Model of Toll Road Length to Population in East Asia

The length of toll road in China so fantastic, there are currently 53,600 km of toll road traversing the country – the second longest in the world behind the United States, which has 89,000 km. And China plans to have 85,000 km of toll road by 2020.Meanwhile, in East Asia including Indonesia, Malaysia, Philippines, and Thailand, in 2006 there were respectively 608 km, 2,332 km, 181 km, and 176 km. In this paper wants to see the relationship of length of toll road to population as independent variable and foreign direct investment (FDI), Toll road investment, land area, gross domestic product (GDP) as dependent variable.The method of this study use econometric analysis on pooled data.The result of this study will see how China and Malaysia maintain their toll road investment to sustain their GDP, and how the length of toll road growth in Indonesia, Philippines, and Thailand lower than China or Malaysia.

Capital Structure of Indonesian Toll Road Investor

The development of toll road investment in Indonesia from the year 1978 until 2008 still slowed down. Before financial crisis, before 1998, the total length of toll road in Indonesia was 532.62 km. At the same time, compared to other nations in East Asian, such as China the total length of toll road was 4,735 km, Philippines was 168 km, Malaysia was 1,127 km, and Thailand was 91 km. So, the total length of Indonesian toll road from 1978 to 2007 was 663.82 km or average growth from 1978 to 1997 was 16.36% per year; and from 1998 to 2007 was 2.26% per year. Compare with China has reached is 45,400 km, Malaysia is 1,574 km, Philippines is 198 km, and Thailand is 107 km.In investment, the total toll road investment in Indonesia from 1990 through 2006 is US

The Improvement of Nation Invesment Competitiveness: Financial Innovation for Infrastructure Financing

3,335 million, in China US

The Improvement of Nation Invesment Competitiveness: Financial Innovation for Seaport Infrastructure Financing

20,045 million, Philippines US