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The Need, Capacity and Willingness of Regional Governments to Finance
Public Infrastructure from Long-Term LoansBuilding Capacity for the Development of
Sub-National Government Capital Market for Municipal BondsJune 2011
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The Need, Capacity and Willingness of the Regions to Finance Public Infrastructure from Long-Term Loans
1 Final Report (June 2011)
Background. As part of an ongoing program of activities to encourage long-
term borrowing for public infrastructure by regional governments1, the
Government of Indonesia (GOI) has recently issued Government Regulation
30 of 2011 on regional borrowing (PP30/2011).2 Unlike its legal predecessor
PP54/2005, the new regulation allows regional governments to borrow long-
term for public infrastructure projects that are indirectly revenue-generating,
such as roads and flood control systems. Until the late 1990s, a major
portion of long-term loans to regional governments was financed by inter-
national financial institutions, mainly the Asian Development Bank (ADB) and
the World Bank. In view of the need to increase investments in public
infrastructure, and the absence of a domestic market for long-term financing,
GOI is currently considering re-opening this window by establishing a
Municipal Development Fund (MDF) in the Ministry of Finance. Against this
background, the Directorate-General of Fiscal Balancing in the Ministry of
Finance (MoF) has requested the Decentralization Support Facility (DSF) to
recruit a consultant to assist the Directorate-General with a review of the
need for long-term loans by regional governments, and an analysis of the
potential constraints to channeling such loans to the regions.
Objectives and Contents of this Report
Objective. The objectives of the Consultant’s assignment are to:
review the need for long-term loans to regional governments,
assess the capacity of regional governments to repay long-term loans,
identify existing constraints to long-term borrowing by the regions, and
recommend options for removing or mitigating the existing constraints.
A desktop study was undertaken to review regional government borrowing
needs and repayment capacities. The identification (and possible resolution)
of constraints to long-term borrowing was based on focus group discussions
with officials of five regional governments, each of which was deemed to
have a substantial borrowing capacity: Kabupaten Bogor, the Province of
Central Sulawesi, the Province of Bali, the Special Region of Yogyakarta, and
Kota Samarinda (refer to Annex 1 for details on these field visits).
Structure of this report. Chapter 1 presents an assessment of the need for
investments in public infrastructure by regional governments. Chapter 2
contains a conservative estimate of the total borrowing capacity of regional
governments, based on a definition of the maximum borrowing limit (batas
pinjaman maksimal) derived from PP30/2011. Chapter 3 gives an overview
of current constraints on long-term lending to regional governments, and
recommends options to mitigate the adverse impacts of these constraints.
Disclaimer. The contents of this report do not necessarily reflect the views of
the DSF or the Government of Indonesia.
1 In this report, the term “region” or“regional government” refers to a province, kota or
kabupaten. 2 Peraturan Pemerintah Nomor 30 Tahun 2011 tentang Pinjaman Daerah
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
2 Final Report (June 2011)
1 Need for Long-Term Loans
Definition of need for long-term loans. This report defines the need of
regional governments to finance public infrastructure from long-term loans
as: “the total amount of funds needed to finance investments in public infra-
structure that:
are presently not undertaken by the private sector because expected (risk-
adjusted) returns do not outweigh expected costs,
have an economic lifetime of at least ten years (this rules out the financing
of, for example, solid waste collection equipment),
constitute a regional government responsibility according to PP38/20073, and
cannot be financed from regional government budgets (APBD)”.
Constraints to estimating the need for long-term loans. Estimating the
need for long-term loans by regional governments is fraught with difficulties,
including but not limited to:
Uncertainties about private sector interest. These is considerable varia-
tion in private sector interest in financing public infrastructure, both over time
(foreign direct investment has picked up in recent years, but remains below
levels achieved in the early 1990s), and across regions (for example, the
private sector remains interested in financing piped water supply in large and
metropolitan cities, but not in smaller cities or rural areas).
Uncertainties about financing responsibilities of regional governments.
There is presently a lack of consensus and clarity about the relationship
between central, provincial and kabupaten/kota responsibilities for providing
and financing public infrastructure (for example, Kota Samarinda was
required to co-finance its new airport, even though it will be managed by the
Ministry of Communications as a national airport).
Lack of recent financial data. There are no recent data on aggregate
regional government investments in public infrastructure (the latest available
data were taken from BPK reports for 2007).
For these reasons, the estimates presented in this chapter are indicative only
and should be interpreted as such.
Methods for estimating the need for long-term loans. In view of the
abovementioned difficulties to prepare a reliable estimate of the need for long-
term loan financing, the Consultant decided to use two qualitatively different
methods in order to obtain a range of estimates:
Macroeconomic method. This method estimates the need for long-term
loans in two steps. It first estimates the need for regional investments in public
infrastructure by comparing required and actual investment levels (which are
both expressed as a percentage of GDP). It then estimates the portion of the
required increase that may realistically be financed from internal revenue
(APBD). The remainder is defined as the need for long-term loans.
3 Peraturan Pemerintah Nomor 38 Tahun 2007 tentang Pembagian Urusan Pemerin-
tahan Antara Pemerintah, Pemerintahan Daerah Provinsi, dan Pemerintahan Daerah Kabupaten/Kota
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
3 Final Report (June 2011)
Sectoral method. This method estimates required investments by regional
governments in major infrastructure sectors (or uses estimates from existing
sources) that are needed to achieve pre-defined policy targets, such as the
achievement of MDGs by the end of 2015. The portion of investments that may
be financed from APBD is the same as the amount identified by the macro-
economic method; the remainder is defined as the need for long-term loans.
For both methods, the need for long-term loans was estimated for the five-
year period 2011-2015.4
Limitations to estimating the need for long-term loans using a micro-
economic method. The Consultant was unable to prepare realistic estimates
of the need for long-term loans based on detailed information provided by
regional governments visited in June 2011, mainly because of:
Absence of investment cost data. Focus group discussions revealed that
most regional governments do not prepare cost estimates for their medium-
term development plans (Rencana Pembangunan Jangka Menengah
Daerah or RPJMD).
Major differences between actual and planned investment programs.
Regional governments routinely undertake investment projects that are not
listed in their RPJMD, often because of overriding short-term political
considerations. In other words, even if a regional government had prepared
investment cost estimates, these estimates would not necessarily reflect its
needs for public infrastructure or long-term loans.
Major differences in composition of investment programs. Focus group
discussions revealed substantial differences in the composition of regional
government investment programs (Table 1). Apart from new access roads,
which were proposed by most regional governments, there was no common
sectoral focus of proposed investment projects. As a result, the findings of
the field visits could not be meaningfully extrapolated to obtain an estimate of
regional government infrastructure needs (and thereby of the need for long-
term loans) for the country as whole.
Table 1
HIGH-PRIORITY INFRASTRUCTURE PROJECTS IN SELECTED REGIONS
Region High-Priority Infrastructure Projects
Kab. Bogor Local road (Jalan Puncak II), bus terminals
Prov. SulTeng* Local airports, rehabilitation of roads, teaching hospital
Prov. Bali* Local hospitals, traditional markets, piers, bulk water supply, toll roads, port development
DI Yogyakarta Access roads to open up areas with tourism potential, urban transport (procurement of buses), area traffic control system
Kota Samarinda Access roads to industrial areas, relocation of shipbuilding industry, port development
Source: Consultant, based on focus group discussions held in June 2011 * Including infrastructure projects proposed by kota and kabupaten in that province
4 It is necessary to define a planning period, because the need for long-term loans
would become infinite without such a boundary.
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
4 Final Report (June 2011)
Macro-Economic Method: Estimated Need for Long-Term
Loans as a Percentage of GDP
Current vs. required investments in public infrastructure. In 2007, the
most recent year for which data are available, regional governments invested
approximately IDR 72 trillion in fixed assets, which accounted for about 24%
of total revenue in that year (Table 2). According to recent research, regional
governments need to double their spending on infrastructure from about
1.5% to 3% of GDP to increase total public investment on infrastructure to
5% of GDP (a level that would be necessary to secure an economic growth
rate of at least 6 percent per year).5
Table 2
REGIONAL GOVERNMENT INVESTMENT IN FIXED ASSETS, 2004-2007*
IDR trillion
2004** 2005 2006 2007
Total revenue 165.1 196.7 279.0 305.0
Investment in fixed assets
- Provincial governments NA 10.8 18.3 22.1
- District governments NA 20.8 63.8 49.7
Total investment in fixed assets 22.4 31.6 82.1 71.8
Gross investment as % of revenue 14% 16% 29% 24%
Sources: Consultant, based on BPK (2004-2007), WB (2007) and MoF (2008) * Gross investment in nominal prices, net of asset sales ** World Bank (2007), other data calculated from BPK audited financial reports
Financing of required increases in public infrastructure investments. A
detailed analysis of the public finances of a sample of 15 provinces and 113
kabupaten/kota suggests that, during 2004-2007, regional governments
financed investments in fixed assets almost exclusively from operating
surpluses (Table 3).6 Because few regional governments have borrowed
long-term in recent years, it was assumed that this situation has remained
unchanged. It is unlikely that regional governments will be able to finance a
major increase in public infrastructure investments from an increase in their
operating surpluses. If, for example, regional governments were to double
their investment in fixed assets in 2007 and finance the entire amount from
internal revenue, gross investment in fixed assets would account for almost
half of total revenue. This situation is clearly untenable, as many regional
governments would be unable to meet salary and other essential payments.
For this reason, it was assumed that operating surpluses would increase at
the same growth rate as GDP. The remainder of the required increase would
be financed from long-term loans.
5 World Bank. 2004. Averting an Infrastructure Crisis: A Framework for Policy and
Action. World Bank: Jakarta, Indonesia. 6 B. Lewis and A. Oosterman. 2010. Sub-National Government Capital Spending In
Indonesia: Level, Structure, and Financing. Public Administration and Development.
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
5 Final Report (June 2011)
Table 3
FINANCING OF REGIONAL GOVERNMENT INVESTMENT IN FIXED ASSETS, 2004-2007
IDR trillion
2004 2005 2006 2007
Provincial governments (n=15)
Operating surplus 6.41 8.95 6.98 10.70
Investment in fixed assets 4.98 5.67 7.48 8.72
% Investment financed from surpluses 100 100 93 100
District governments (n=113)
Operating surplus 7.01 9.60 17.65 20.14
Investment in fixed assets 6.15 6.79 12.76 17.65
% Investment financed from surpluses 100 100 100 100
Source: Consultant, based on Lewis and Oosterman (2010)
Results of the macro-economic method. Assuming a price inflation rate of
5.5% per annum and a real economic growth rate of 5% per annum, regional
government investments in infrastructure must increase from about IDR 72
trillion in 2007 to over IDR 320 trillion in 2015 (Table 4). The total required
investment during 2011-2015 is about IDR 1,100 trillion, of which IDR 670
billion would be financed from operating surpluses. This implies a total need
for long-term loans of (1,100-670=) IDR 430 trillion, or appr. US$50 billion.
Table 4
NEED FOR LONG-TERM LOANS FOR INFRASTRUCTURE, 2011-2015, MACRO-ECONOMIC METHOD
IDR trillion
2011 2012 2013 2014 2015 TOTAL
Required investment 130 168 212 265 326 1,100
Financed from surpluses 108 120 133 147 163 670
Need for long-term loans 22 48 80 118 163 430
Source: Consultant
Sectoral Method: Estimated Need for Long-Term Loans for
Key Infrastructure Sectors
Identification of key infrastructure sectors. PP38/2007 identifies no fewer
than 31 government activities and services for which central, provincial and
kabupaten/kota governments are collectively responsible. The majority of these
is classified as “mandatory affairs” (urusan wajib), the most important of which
are: education, health, public works, environment, development planning,
spatial planning, telecommunications and IT, social affairs, and community
empowerment. Unfortunately, regional governments do not publish a sectoral
breakdown of their investments. It is known, however, that regions finance, on
average, 25-30% of their total capital investments from DAK.7 In 2010, four
infrastructure sectors accounted for 75% of total DAK allocations:
7 A. Oosterman. 2011. Proposals for Reform of the Special Allocations Grant (DAK).
ADB: Jakarta, Indonesia.
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
6 Final Report (June 2011)
roads and bridges
basic education
public health, and
water supply and sanitation.
At the request of MoF, the “traditional markets” sector was added to this list
of sectors for which investment requirements were estimated. All five sectors
require long-term investments for which regional governments are
responsible and that are unlikely to be co-financed by the private sector.
Estimation of required investment by infrastructure sector. In 2007,
BAPPENAS published a research report that contains detailed estimates of
investments needed to achieve Millennium Development Goals (MDGs) by
the end of 2015.8 These estimates were used for the basic education, public
health, and water supply and sanitation sectors (adjusted for price inflation).
In the absence of similar policy targets for the other two sectors, it was
assumed that each regional government would, from 2011-2015, also invest
in:
the repair of roads classified as “broken” or “very broken” (at an average cost
of IDR 2 billion per kilometer),
the expansion of the length of their road networks by 5% (at a cost of IDR 10
billion per kilometer), and
the construction or rehabilitation of one traditional market (at an average
cost of IDR 50 billion per market).
Results of the sectoral method. The total required investment in the five
sectors during 2011-2015 is estimated at about IDR 934 trillion, mostly for
roads and education (Table 5). Of this, IDR 670 trillion would be financed
from the regional government’s operating surpluses (this is the same
estimate as was used for the macro-economic method). This means that the
total need for long-term loans is estimated at (934-670=) IDR 264 trillion, or
almost US$30 billion. Because regional governments are also responsible for
other infrastructure sectors, it is not surprising that the estimated need for
long-term loans is lower than the estimate generated by the macro-economic
method (which implicitly considered all sectors).
Summary: need for long-term loans. During 2011-2015, regional
governments will need to invest approximately IDR 1,000 trillion in public
infrastructure. They will be able to finance at most IDR 670 trillion from
internal revenue. This implies a need for long-term loans in the order of IDR
330 trillion (or IDR 60-70 trillion per year).9
8 BAPPENAS. 2007. Pembiayaan Pencapaian MDGs di Indonesia – Laporan Kajian.
BAPPENAS: Jakarta, Indonesia 9 This estimate is exclusively based on a comparison of infrastructure needs and
available financing from internal revenue, and admittedly ignores limitations to the implementation capacities of regional governments.
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
7 Final Report (June 2011)
Table 5
NEED FOR LONG-TERM LOANS FOR INFRASTRUCTURE, 2011-2015, SECTORAL METHOD
IDR trillion
Sector 2011 2012 2013 2014 2015 TOTAL
Local roads 77 82 86 91 96 432
Basic education 42 44 46 49 52 232
Public health 21 24 27 30 34 136
Water and sanitation 17 17 19 23 30 105
Traditional markets 5 5 6 6 6 28
Total 162 172 184 198 217 934
Financed from surpluses 108 120 133 147 163 670
Need for long-term loans 54 52 51 51 54 263
Source: Consultant, based on BAPPENAS (2007)
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
8 Final Report (June 2011)
2 Capacity to Repay Long-Term Loans
Limits to regional government borrowing. Borrowing by regional govern-
ments is regulated by PP30/2011. Article 15 of the new PP states that a
regional government must meet four conditions before it may take on a loan
with a term of at least one year (such loans include municipal bonds and
central government loans financed from foreign sources):
its total outstanding long-term debt (TOLTD) does not exceed 75 percent of its
non-earmarked revenues in the previous budget year,
its debt service coverage ratio (DSCR) must be not fall below a ratio to be
defined by the central government (this report assumes a ratio of 2.5, as was
the case in PP54/2005, the legal predecessor of the current PP)
it is not in arrears on outstanding central government loans, and
it has obtained approval from its parliament (DPRD) to apply for the loan.
All limits should hold in any given year throughout the term of the proposed
borrowing. The capacity of a regional government to repay long-term loans is
defined as the maximum amount that the region can borrow before it violates
any one of the four limits.
Limit #1: TOLTD < 75% of non-earmarked revenue in previous year.
Non-earmarked revenue is the sum of own-source revenue (Pendapatan Asli
Daerah or PAD), the general allocation (Dana Alokasi Umum or DAU) and
shared tax and non-tax revenue (Dana Bagi Hasil or DBH). Taken together,
these three sources normally account for over 90% of regional government
revenue. Stated differently, a typical regional government could absorb a
long-term loan with a value of approximately (90% x 75% =) 67.5% of its
revenue in the previous year before violating Limit #1.
Limit #2: DSCR > 2.5. The clarifications to Article 15 of PP30/2011 define
the DSCR as (Non-earmarked Revenue – Obligatory Expenditures) / Debt
Service. If a regional government wishes to borrow long-term, it must ensure
that the following condition holds during the term of the proposed loan:
Non-Earmarked Revenue – Obligatory Expenditures > 2.5 [2-1]
Debt Service
Non-earmarked revenue is the sum of PAD, DAU and DBH (excluding
DBHDR).10
Obligatory expenditures consist of civil servant salaries, which
usually account for up to 60% of total regional government revenue. Debt
service consists of projected repayments and financing charges (including
interest payments) on outstanding and new loans. The DSCR is usually
lowest in the first year of repayment (in which the outstanding principal on the
loan is highest). Equation [2-1] can be rewritten as follows:
PAD + DAU + DBH – DBHDR – Salaries > 2.5 [2-2]
Debt Service
10 DBHDR stands for Dana Bagi Hasil Dana Reboisasi. This is a portion of a regional
government’s revenue share that is earmarked for reforestation.
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
9 Final Report (June 2011)
Limit #3: no arrears on central government loans. In theory, PP30/2011
only applies to loans extended to regional governments. It does not apply to
loans taken on by enterprises owned by regional governments, such as
PDAMs. In practice, however, the Directorate-General of Treasury in the
Ministry of Finance is reluctant to lend or on-lend funds to a regional
government who owns a PDAM (or other municipal enterprise) with arrears
on central government loans. This is highly relevant, because arrears on
PDAM loans account for a major share of total arrears on central government
loans to regional governments and their enterprises.
Limit #4: DPRD approval. Experience with regional governments indicates
that securing DPRD approval for a loan is a time-consuming process. This is
especially the case for sub-loans (i.e. foreign loans channeled to regional
governments through the Ministry of Finance). DPRD members are often
reluctant to sign a standard letter, which forms part of a standard sub-loan
agreement prepared by the Ministry of Finance, stating that the Ministry
retains the right to settle the late payment or non-repayment of debt service
charges by a reduction in DAU transfers, even though this provision is
explicitly mentioned in Law 32/2004.
What about macro-economic lending limits? According to Law 17/2003
on State Finances, outstanding loans of the central government should not
exceed 60% of Gross Domestic Product. Some regional government officials
believe that the “60%-limit” also applies to individual regions, even though
Law 17/2003 explicitly refers to the central government’s budget. In practice,
the limit would be largely irrelevant because a regional government would
normally breach Limit #1 (“TOLTD <75% of previous year’s non-earmarked
revenue”) long before its total long-term outstanding debt would exceed 60%
of its gross regional domestic product (GDRP). This is because few regions
have a revenue of at least (60% / 75% =) 80% of GDRP.
Methodology for estimating debt repayment capacity
Overview. The debt repayment capacity of a regional government is defined
as the maximum amount that the region can borrow before it violates any of
the four limits mentioned in PP30/2011. Assuming that the DPRD of a
regional government would be willing to approve a new loan, the debt
repayment capacity of a regional government is the lowest of the following
three amounts:
Limit #1: 75% of non-earmarked revenue (PAD+DBH+DAU) in the previous
year (in the absence of recent data, DBHDR was assumed zero).
Limit #2: the amount a regional government is able to borrow before its DSCR
drops below 2.5 in any year during the repayment period of the new loan.
Limit #3: zero in case the regional government is in arrears on loans from the
central government (it is not clear if Limit #3 also applies to central government
loans to regional government enterprises), and the next lowest value in case
the region is not in arrears
The calculation of the amounts associated with Conditions #1 and #3 is
straightforward. The calculation of the maximum amount a region is able to
borrow whilst maintaining a DSCR of at least 2.5 is discussed below.
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
10 Final Report (June 2011)
Assumptions. To estimate regional government debt repayment capacities
for 2011, it is necessary to forecast non-earmarked revenues, obligatory
expenditures and debt service during the term of a proposed loan. Each of
these items was estimated based on two highly conservative assumptions:
Non-earmarked revenues and obligatory expenditures will remain at the 2010
level (in reality, non-earmarked revenues will normally increase at a higher rate
than salaries)
Debt service on existing loans is equal to the maximum amount the central
government may intercept in case a regional government would default on a
loan to the central government; this amount is 10%, 15% or 20% of the sum of
DAU and DBH allocations, depending on the fiscal capacity of the regional
government11
(this is again a highly conservative assumption, because debt
service usually accounts for less than 5% of regional government revenue)
After rearranging terms, equation [2-2] becomes:
Debt Service < 0.4 (PAD + DBH + DAU –Salaries) 2010 [2-3]
where:
Debt Service = Debt Service NEW + α (DBH + DAU) 2010 [2-4]
α: intercept parameter (10%, 15% or 20%)
Loan types. Because equation [2-3] must hold during any given year, and
because it was assumed that the term “0.4 (PAD + DBH + DAU –Salaries)
2010” remains constant throughout the loan term, the debt repayment capacity
of a regional government is constrained by the maximum debt service
payment during the term. Maximum debt service depends on the loan
conditions, and especially on the type of loan. Two types of loans were
considered: (i) decreasing debt service payments (equal installment method),
and (ii) constant debt service payments (annuity).
Maximum debt service by loan type. Table 6 shows maximum debt service
payments by loan type, expressed as percentage of the total drawdown. For
both loan types, the following conditions were assumed:
drawdown of the full loan amount in 2011,
interest rate: 10% per year, including management fee,
commitment fee: 0.25% per year on the undisbursed balance,
grace period: 5 years (on principal only), and
principal repayment period: 20 years.
Assumed loan type. The Ministry of Finance normally offers “equal
installment” loans to regional governments. The underlying repayment
schedule is more conservative than that of the annuity method (which yields
higher debt repayment capacities). Under the equal installment method, the
debt repayment capacity (DRC) of a regional government can be expressed
as (1 / 15.2% =) 6.56 times the maximum debt service. In formula:
11 As stipulated in Peraturan Menteri Keuangan Nomor 129 Tahun 2008 Tentang
Tata Cara Pelaksanaan Sanksi Pemotongan Dana Alokasi Umum dan/atau Dana Bagi Hasil Dalam Kaitannya Dengan Pinjaman Daerah dari Pemerintah Pusat. The value of α is 10% for regions with a fiscal capacity index (FCI) of less than 0.5, 20% if the FCI is more than 1, and 15% in all other cases.
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
11 Final Report (June 2011)
DRCTOTAL = 0.4 (PAD + DBH + DAU – Salaries) 2010 6.56 [2-5]
Adjustment for debt services on existing loans. Regional governments
will need to use part of their debt repayment capacities to service existing
loans. As expressed in [2-3], these debt service charges were conservatively
estimated at 10-20% of the sum of DAU and DBH in 2010. Because the
minimum DSCR of 2.5 also applies to these amounts, the portion of the DRC
that can be used for new loans is:
DRCNEW = DRCTOTAL – 2.5 α (DBH + DAU) 2010 [2-6]
Table 6
COMPARISON OF KEY FEATURES OF SELECTED LOAN TYPES
Equal Installment Annuity
Principal repayments Constant Increases over time
Interest payments Decrease over time Decrease over time
Total debt service Decrease over time Constant
Maximum debt service / Drawdown 15.2% 12.0%
Year of maximum debt service First year of principal repayment
Same in all years of principal repayment
Source: Consultant
Results of the analysis
Compliance with Limit #1. According to preliminary MoF data for all 523
regional governments that existed at the end of 2009, total non-earmarked
revenue of regional governments was approximately IDR 343 trillion in 2010.
Because regional governments are not allowed to have total long-term
outstanding debt of more than 75% of this amount, Limit #1 limits the total
debt repayment capacity of regions to (0.75 x 343=) IDR 257 trillion.
Compliance with Limit #2. Based on the “minimum DSCR” method, the
total debt repayment capacity of all regional governments is estimated at IDR
281 trillion. For 165 of 523 regions the repayment capacity generated by this
method exceeds the “75% limit” (unless the region is in arrears).
Compliance with Limit #3. In the absence of data on arrears, this limit was
not considered. It should be noted, however, that most regions with arrears
would clear these arrears in one year if the central government were to apply
the maximum intercept amount, as was assumed for the estimation of Limit
#2. (According to a study commissioned by MoF in 2008, all but 12 regions
were able to repay all arrears on regional governments loans and loans to
PDAMs and other regional government enterprises within one year.12
)
Summary: capacity to repay long-term loans. In 2010, the total debt
repayment capacity of all regional governments was conservatively
estimated at IDR 188 billion. This amount was equivalent is about 44% of the
total need for long-term loans for 2011-2015 according to the macro-
economic method (and 71% in case the sectoral method would be applied).
12 A. Oosterman and E.D. Woodward, Operationalizing the Central Government
Transfer Intercept Mechanism - Interim Report, DSF, Jakarta, April 2008
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
12 Final Report (June 2011)
3 Willingness to Use Long-Term Loans
Willingness compared to need and capacity to use long-term loans. As
described in the preceding chapters, the need for long-term loans to regional
governments is substantial (up to IDR 430 trillion during 2011-2015). A
conservative estimate of sub-national borrowing capacities indicates that
regional governments are able to repay a significant portion of the required
loan funds. However, they are generally unwilling to take on long-term loans,
especially those offered by the central government. Why is this so?
Figure 1
NEED, CAPACITY AND WILLINGNESS TO USE LONG-TERM LOANS, 2011-15
Source: Consultant
Causes of limited willingness to borrow. Focus group discussions (FGDs)
with regional government officials indicate that regions have a demonstrated
need for infrastructure financing (as evidenced by a large number of
unfunded project proposals) and are aware that a substantial portion of their
borrowing capacities remains unused. FGD participants offered a large
number of explanations to account for the fact that most regions nonetheless
remain reluctant to borrow from the central government (who is currently the
only provider of long-term loans the regions). These explanations were
grouped in three root causes, each of which will be discussed below in detail:
opposition from DPRD,
lengthy loan preparation time, and
uncertainty about loan conditions.
It should be noted that the three root causes are mutually reinforcing. For
example, because of very lengthy loan preparation times (of sometimes
almost two years), some regional governments lost the support of DPRDs
who initially supported loan applications. Similarly, some regional govern-
ments decided not to pursue applications for central government loans after
changes to counterpart fund requirements and interest rates.
Opposition from DPRD. According to all five regions interviewed by the
Consultant, lack of support by the local parliament (Dewan Perwakilan
Rakyat Daerah or DPRD) is the primary constraint to regional government
borrowing. It appears that the decisions of many DPRD members are largely
guided by short-term political considerations. To protect the interests of the
party they represent, they usually oppose long-term loans if the proceeds of
these loans would be used to finance a project that was either developed by
NEED WILLINGNESS CAPACITY
IDR 188 trillion
?
IDR 263 trillion (sectoral method)
IDR 430 trillion (macro-economic method)
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
13 Final Report (June 2011)
the predecessor of the current mayor, or may be undertaken by his or her
successor (this may also explain why DPRD approval for long-term loans is
usually granted in regions where the mayor and the majority of the DPRD
members are from the same party). For defensive reasons, DPRD members
tend to oppose proposals for long-term loans (and presumably any similar
proposal) if a regulation exists that may be used against the interests of the
DPRD. This may explain why many DPRD members do not wish to formally
accept that MoF will apply the DAU/DBH intercept mechanism in the event of
a default on loan repayments, even though this mechanism is already
enshrined in law. FGD participants also reported cases in which DPRD
rejected long-term loan proposals because of apparent inconsistencies
between PP54/2005 and Minister of Home Affairs Decree 37/2010 (even
though Indonesian law clearly states that the PP should be applied in such a
case) and a requirement to issue a by-law to confirm that the regions would
repay a proposed loan according to the agreed loan repayment schedule.
Lengthy loan preparation time. Historically, most long-term loans to
regional governments have been financed from the proceeds of loans from
international financial institutions, mainly the World Bank and ADB. Until
recently, the channeling of such loans to regional governments (also known
as “on-lending”) was governed by PP2/2006.13
In practice, the implementa-
tion of this regulation was so complicated, and involved such a large number
of parties, that regional governments could only obtain such loans at the
expense of very lengthy preparation times (ranging from 6 to 24 months).
Many regional governments lost interest during the lengthy preparation time,
or found that a newly elected mayor or parliament was no longer interested
in pursuing a regional infrastructure project initiated by a predecessor (see
Box 1 and Box 2 for examples). In January 2011, the Government replaced
PP2/2006 by PP10/2011.14
Because the provisions for the channeling of
foreign loans to regional governments remains virtually unchanged from
those prescribed in PP2/2006, there is no reason to believe that loan
preparation times will be reduced, as long as MoF would mainly use the on-
lending mechanism to finance long-term loans to the regions.
Box 1
WATER SUPPLY AND SANITATION PROJECT
Originally, this ADB-supported project envisaged the on-lending of US$
100 million to 12 municipal water enterprises (PDAMs). After three years of
project preparation, all PDAMs had withdrawn, except the PDAMs of
Kabupaten Bandung and Kabupaten Tapanuli Tengah, with a combined
financing requirement of US$ 30 million. In 2007, the local parliament of
Kabupaten Bandung stated that it would not be willing to sign a letter an
agreement to the DAU/DBH intercept in the event of default. ADB decided
not to pursue a project with Kab. Tapanuli Tengah as the only participant.
Source: Consultant
13 Peraturan Pemerintah Nomor 2 Tahun 2006 tentang Tata Cara Pengadaan
Pinjaman dan/atau Penerimaan Hibah serta Penerusan Pinjaman dan/atau Hibah Luar Negeri
14 Peraturan Pemerintah Nomor 10 Tahun 2011 tentang Tata Cara Pengadaan Pinjaman Luar Negeri Dan Penerimaan Hibah
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
14 Final Report (June 2011)
Box 2
URBAN SECTOR DEVELOPMENT REFORM PROJECT
In 2005, GOI signed a US$35 million loan agreement with the World Bank
for the financing of full cost-recovery urban infrastructure projects in 13
district governments throughout the country (mostly bus terminals and
markets). The preparation of this project (the Urban Sector Development
Reform Project or USDRP) required more than two years, and cost over
US$2 million. As of May 2010, less than 50% of the loan was been
disbursed compared to the estimated disbursement rate of 90%, partly
because of lengthy loan applications procedures. For example, in 2009,
Kota Manado applied for a USDRP-funded sub-loan to co-finance an e-
government project. Over eighteen months later, in June 2011, the kota
had not received a formal reply to its application.
Source: Consultant
Uncertainty about loan conditions. Focus group discussions revealed that
regional governments are usually unaware of the conditions that apply to long-
term offered by the central government. More importantly, loan conditions may
change during the loan preparation process, which tends to undermine
discussions with DPRD members and other decision-makers at the regional
government level. The following conditions are of particular concern:
Interest rates. Regional governments strongly favor fixed interest rates,
because a repayment schedule based on fixed rates is perfectly predictable
and will therefore not require a budget revision. Since 2005, the Ministry of
Finance offers variable interest rates only. (In addition, the Ministry does not
give regional governments the option to repay loans using the equal
installment method, which would presumably be favored by regional
governments because of the ease in budgeting such amounts.)
Counterpart fund requirements. FGDs indicate that regional governments
accept that certain costs (notably land acquisitions and overheads) are not
eligible for financing from the proceeds of central government loans. However,
regional governments oppose the requirement to finance a pre-agreed
percentage of the cost of a project from counterpart funds (and especially a
change to such a percentage, because this may trigger a budget revision).
Administrative requirements. Participants to FGDs strongly indicate that the
preparation of a loan is adversely affected by the need to obtain DPRD
approval. For this reason, regional government officials strongly support loan
conditions that avoid the need for a local by-law (Peraturan Daerah or PerDa)
or a budget revision.
Recommendations for improving regional government
willingness to finance infrastructure from long-term loans
Recommendations aimed at reducing opposition from DPRD. Even
though opposition from DPRD is the main impediment to the willingness of
regional governments to finance infrastructure needs from long-term loans, this
reports accepts that the DPRD must be responsible for approval of regional
government budgets, including budget financing from long-term loans.
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
15 Final Report (June 2011)
#1a Target regional governments where DPRDs are most likely to support
long-term loans. These are regional governments:
with a high degree of urbanization (defined as all kota governments, and
kabupaten government with a population density of at least 750 persons/km2),
where the mayor was recently elected (regions with upcoming elections are
normally not interested in long-term loans),
where the mayor is of the same party as the majority of the DPRD,
without arrears on central government loans (including arrears on BUMDs
owned by the regional government),
without an request for territorial subdivision (pemekaran) under consideration
by DPRD, and
without an unresolved conflict about the separation of assets and liabilities
arising from past pemekaran.
#1b Target regional governments shortly after preparation of annual budget.
Regional governments need to include loan drawdowns and debt service
payments in their annual budget. Approaching regional governments in
November and December (when annual budgets will have been already
approved) maximizes the time for regional governments to discuss long-loan
proposals and incorporate the financial impacts into next year’s budget.
#1c Allow regional governments to (partly or wholly) repay a loan ahead of
the repayment schedule without imposing a penalty. This loan condition,
which is currently not included in loan agreements between MoF and the
regions, may encourage DPRDs to approve long-term loans (because it
gives DPRD the option to effectively reverse the decision at a later date).
#1d Disseminate newly issued laws, regulations and decrees to regional
governments and their DPRDs.
Recommendations aimed at reducing loan preparation times.
#2 Establish a Municipal Development Fund (MDF) to channel loan funds
to regions in a timely and equitable manner. Most central government
agencies, development partners, and regional governments have concluded
that the on-lending mechanism – as described in PP10/2011 and previously
in PP2/2006 – does not work. At present, however, regional governments do
not have the option to finance infrastructure needs from domestic sources,
because the Indonesian capital markets does not offer maturities beyond 7-
10 years. To address this market failure, it is recommended that MoF
establish a Municipal Development Fund (MDF) that provides long-term
loans to regional governments using more flexible procedures than the
current mechanism. It is envisaged that the MDF would be co-financed with
the proceeds of multilateral program loans. However, the program loan funds
would be on-lent at conditions set by the MDF, and not at conditions that are
(virtually) identical to those imposed by foreign lenders on MoF (Figure 5).
This would give GOI the additional benefit of being able to channel funds to
the regions at conditions that are equitable to all instead of determined by the
conditions of the foreign loan from which a particular sub-loan is financed.
(MoF is considering to establish an MDF in Pusat Investasi Pemerintah,
although this decision was not confirmed at the time of writing.)
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
16 Final Report (June 2011)
Figure 2
CURRENT AND PROPOSED LOAN CHANNELING ARRANGEMENTS
Source: Consultant
Recommendations aimed at increased transparency of loan conditions.
#3a Publish loan conditions on the MoF website. This recommendation is
made to inform regional governments in advance of the conditions that apply
to long-term loans extended by MoF, and to discourage the past practice of
making undocumented changes to loan conditions.
#3b Remove the condition that regions must finance a fixed percentage of
the project cost from counterpart funds. Instead, it is recommended that
the loan conditions published on the MoF website clearly stipulate which
expenditures are not eligible for long-term loan finances (all other expen-
ditures would, in principle, by eligible for 100% long-term loan financing).
#3c Remove the condition that regions must issue a PerDa to implement a
loan agreement. Such a by-law is redundant (because the loan agreement
already stipulates the obligations of the regional government) and will
needlessly slow down the loan preparation process at the regional level.
#3d Provide long-term loans in Rupiah only. It is recommended that the
Ministry of Finance will lend only extend long-terms denominated in Rupiah,
not only because regional governments do not receive income in foreign
currency, but also because regions do not have any experience with
managing foreign exchange rate risks.
#3e Provide long-term loans at fixed interest rates only. Regional govern-
ments have a strong preference for loans with a fixed (as opposed to
variable) interest rate, mainly because such loans do not carry interest rate
risk, but also because fixed interest rates do not require revisions to
budgeted interest payments. For administrative reasons, lending at fixed
interest rates is also preferably to MoF (among other things, it avoids the
need to send updated interest payment schedules to regional governments).
Government (MoF)
Foreign Lender
Regional Govt A
Project Loan (foreign currency)
Sub-Loan (foreign currency
or Rupiah)
Government
(MoF)
Foreign Lender A
Foreign Lender
Regional Govt B
Foreign Lender B
Government (MoF)
Foreign Lender
Regional Govt A
Municipal Development Fund (MDF)
Foreign Lender A
Foreign Lender
Regional Govt B
Foreign Lender B
Ministry of Finance
PROPOSED
CURRENT
Program Loan (foreign currency)
MDF Loan (Rupiah)
ANNEX 1 Description of Field Visits
17 Final Report (June 2011)
Overview. From 6 to 28 June 2011, the Consultant visited five regions,
together with Ministry of Finance officials, in order to obtain views of regional
government officials on financing public infrastructure from long-term loans.
This annex summarizes the findings of these field visits.
Methodology
Interview methodology. The Consultant conducted focus group discussions
with the head of the regional planning board (Badan Perencanaan Daerah or
Bappeda) and one or more heads of departments responsible for the
implementation of activities that might be financed from the proceeds of a
long-term loan. Each interview covered at least the following topics:
planned investments in infrastructure in the short and medium term
level of interest to finance part of the planned infrastructure investments from
long-term loans,
level of acceptability of long-term loan conditions,
potential constraints to long-term borrowing, and
other issues related to long-term borrowing.
The focus group discussions were facilitated by the use of a questionnaire, of
copy of which is included in this annex.
Selection of regional governments. To ensure that the field visits would
give a balanced view on DAK utilization at the local level, the Consultant
selected five regions from 30 regions with the largest borrowing capacity
according to the method described in Chapter 2. In addition, regions were
selected from various parts of the country, with two regions in Java, and one
each in Kalimantan, Sulawesi and Bali (Table A1.1).
Table A1.1
REGIONAL GOVERNMENTS VISITED
Region Date of
Visit Key Participants
Kab. Bogor 6 June 2011 Head of Bappeda
Prov. Sulawesi Tengah
8 June 2011 Head of Bappeda, heads of relevant line departments (incl. public works, health, education, and finance)
Prov. Bali 14 June 2011 Assistant to the Regional Secretary, representatives from nine kabupaten/kota
Prov. Yogyakarta 22 June 2011 Vice-head of Bappeda, Head of Finance Department
Kota Samarinda 27 June 2011 Head of Bappeda
Source: Consultant
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
18 Final Report (June 2011)
Table A1.2
SUMMARY OF FOCUS GROUP DISCUSSIONS WITH SELECTED REGIONAL GOVERNMENTS
Region Sectors with
Potential for LT Loan Financing
Project with Potential for LT Loan Financing
Comments on Proposed Loan
Conditions
Kab. Bogor Roads (new + rehab), bus terminals, irrigation systems, markets (for sanitary reasons)
Road (Jl. Puncak II, IDR 750b), three bus terminals
Wants land to become eligible for long financing Prefers zero counterpart fund requirement MoF process of 6 months is too long (problems with budgeting process)
Prov. Sulawesi Tengah
Roads, local hospitals, local airports, water supply and sanitation (Kab, Tojo Una-Una and Kep. Banggai only)
Kabupaten airports (Morowali, Tojo Una-Una), O&M of major connector road with high maintenance cost
Prefers long period of up to 25 years Prefers counterpart fund requirement of max. 5%
Prov. Bali Transport, roads, water supply, electricity, telecoms
Kab. Karangasem: Market + hospital (IDR 100b), Kab. Klungkung Market + pier (IDR 790b), Kab. Bangli: Market, hospital (no data given)
Prefers zero counterpart fund requirement and short processing time (prefers PPP and BPD loans to avoid long and unpredictable process of MoF loans)
Prov. Yogyakarta
Access roads, urban transport
Access roads to open up areas with tourism potential, urban transport (procurement of buses), area traffic control system
Acceptable; lack of DPRD support is key constraint
Kota Samarinda
Sectors where private investors need supporting infrastructure
Relocation of shipbuilding industry (IDR 100 b), port development
Strongly prefers short processing time, regulatory uncertainty remains problematic
Source: Consultant
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
19 Final Report (June 2011)
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
20 Final Report (June 2011)
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
21 Final Report (June 2011)
ANNEX 2 Powerpoint Presentation
22 Final Report (June 2011)
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1 | D
ecen
tralizati
on
Su
pp
ort
Facilit
y
Pin
jam
an J
angka P
anja
ng
untu
k P
em
eri
nta
h D
aera
h
Kebutu
han,
Kem
am
puan d
an K
ein
gin
an
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
23 Final Report (June 2011)
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tralizati
on
Su
pp
ort
Facilit
y
Agenda
3.
Kein
gin
an
Daerah
utk
Mem
inja
m
1.
Keb
utu
han
utk
Pin
jam
an
Jan
gka P
an
jan
g
2.
Kem
am
pu
an
Daerah
utk
Mem
inja
m
4.
Reko
men
dasi
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
24 Final Report (June 2011)
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tralizati
on
Su
pp
ort
Facilit
y
Keb
utu
han
dib
an
din
g K
em
am
pu
an
dan
Kein
gin
an
1.
Kebutu
han
Keb
utu
han
: Tid
ak T
erb
ata
s
Kein
gin
an
: S
an
gat
Terb
ata
s
Kem
am
pu
an
: Terb
ata
s
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
25 Final Report (June 2011)
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tralizati
on
Su
pp
ort
Facilit
y
Kesim
pu
lan
#1
–K
eb
utu
han
San
gat
Tin
gg
i
1.
Kebutu
han
Keb
utu
han
In
vesta
si
utk
Tig
a S
ekto
r (
Rp
tril
yu
n)
Su
mb
er:
Pem
bia
yaan
Pen
cap
aia
n M
DG
s d
i In
don
esia
(B
AP
PEN
AS
, 2
00
7)
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
26 Final Report (June 2011)
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ecen
tralizati
on
Su
pp
ort
Facilit
y
PEM
DA
Keb
utu
han
In
frastr
uktu
rU
tam
a
Kab
. B
og
or
Jala
nP
un
cak
II,
Term
inal
Bu
s
Kota
Sam
arin
da
Relo
kasiK
aw
asan
In
du
str
i
Prov.
Bali
Pasar,
Derm
ag
a,
Ru
mah
Sakit
, A
ir M
inu
m
Prov.
Su
lTen
gLap
an
gan
Terb
an
g,
O&
P J
ala
nK
ole
kto
r
DI Y
og
yakarta
Jala
nA
kses
ke
Daerah
Pariw
asata
Kesim
pu
lan
#2
–K
eb
utu
han
San
gat
Bervaria
si
1.
Kebutu
han
Su
mb
er:
Su
rvei D
SF /
Kem
en
keu
(2
01
1)
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
27 Final Report (June 2011)
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on
Su
pp
ort
Facilit
y
1.K
eb
an
yakan
PEM
DA
belu
mp
un
ya
RP
JM
-Dd
en
gan
perkir
aan
bia
ya
investa
si
2.
Un
tuk k
eb
an
yakan
PEM
DA
belu
m a
da h
ub
un
gan
an
tar b
iaya in
vesta
si
tah
un
an
dan
RP
JM
-D
3.
Keb
an
yakan
daerah
men
gu
su
lkan
pro
yek
investa
si
bersif
at
str
ate
gis
(yan
g t
idak b
isa
dip
red
iksik
an
berd
asarkan
sta
tisti
k d
asar)
Kesim
pu
lan
#3
–K
eb
utu
han
tid
ak B
isa D
ihit
un
g
1.
Kebutu
han
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
28 Final Report (June 2011)
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on
Su
pp
ort
Facilit
y
Bata
s P
inja
man
Jan
gka P
an
jan
g
Bata
s p
inja
man
maksim
al:
PP
30
/2
01
1,
Pasal
15
:
1.
Ju
mla
h p
inja
man
<7
5%
pen
erim
aan
um
um
AP
BD
tah
un
seb
elu
mn
ya (
Bata
s #
1)
Min
imu
md
ari B
ata
s #
1 d
an
Bata
s #
2
2.
Kem
am
puan
2.
Ju
mla
h p
inja
man
(yg
ad
a +
yg
diu
su
lkan
)
men
yeb
ab
kan
bah
wa D
SC
R >
2,5
(B
ata
s #
2)
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
29 Final Report (June 2011)
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on
Su
pp
ort
Facilit
y
Perh
itu
ng
an
Bata
s P
inja
man
Jan
gka P
an
jan
g
Perh
itu
ng
an
bata
s:
#1
. B
erd
asarkan
data
his
toris
(P
AD
+D
AU
+D
BH
)
#2
. B
erd
asarkan
data
his
toris
dan
pro
yeksi
2.
Kem
am
puan
Kesu
lita
n d
en
gan
perh
itu
ng
an
Bata
s #
2:
-P
erlu
pro
yeksi
sam
pai akh
ir j
an
gka w
aktu
pin
jam
an
baru
yan
g d
iusu
lkan
(1
5-2
5 t
ah
un
)
-P
erlu
data
yan
g b
iasan
ya t
idak t
ersed
ia
(yait
u j
ad
wal p
em
bayaran
sem
ua p
inja
man
jan
gka m
en
en
gah
dan
jan
gka p
an
jan
g y
g a
da)
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
30 Final Report (June 2011)
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pp
ort
Facilit
y
Usu
lan
un
tuk M
en
gh
itu
ng
Bata
s #
2
Usu
lan
un
tuk P
erh
itu
ng
an
Bata
s #
2:
Men
gg
un
akan
asu
msi
san
gat
ko
nservati
f
un
tuk m
en
gh
itu
ng
Bata
s M
aksim
al In
dik
ati
f
2.
Kem
am
puan
Man
faat
Bata
s M
aksim
al
In
dik
ati
f:
-H
am
pir
sela
lu k
em
am
pu
an
mem
inja
m P
EM
DA
jau
h leb
ih k
ecil d
arip
ad
a u
su
lan
pin
jam
an
PEM
DA
(b
ila t
idak,
PEM
DA
dim
inta
un
tuk m
en
yia
pkan
data
utk
men
gh
itu
ng
Bata
s #
2 s
ecara t
erin
ci)
-M
eto
de p
erh
itu
ng
an
mu
dah
dan
cep
at
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
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on
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pp
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Facilit
y
Perh
itu
ng
an
Bata
s M
aksim
al
In
dik
ati
f
Asu
msi u
tk M
en
gh
itu
ng
Bata
s M
aksim
al
In
dik
ati
f:
-P
AD
, D
AU
, D
BH
, D
BH
DR
: p
ro
yeksi
sam
ad
en
gan
realisasi
rata
-rata
sela
ma
3 t
ah
un
terakh
ir
2.
Kem
am
puan
-B
ela
nja
waji
b:
pro
yeksi
sam
a d
en
gan
reali
sasi
rata
-rata
sela
ma 3
tah
un
terakh
ir
-P
oko
kp
inja
man
, B
un
ga,
Bia
ya
Lain
un
tuk
pin
jam
an
yan
g a
da:
sem
ua
pin
jam
an
yan
g a
da
akan
dilu
nasi
dala
mta
hu
np
ro
yeksip
erta
ma
(ta
pi<
bata
sm
aksim
alp
em
oto
ng
an
DA
U/
DB
H)
-P
oko
kp
inja
man
, B
un
ga,
Bia
ya
Lain
un
tuk
pin
jam
an
baru
: s
esu
ai
den
gan
jad
wal
pem
bayaran
yan
g t
ela
hd
ihit
un
g
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
32 Final Report (June 2011)
Ju
ni2
01
1 | D
ecen
tralizati
on
Su
pp
ort
Facilit
y
Hasil
Su
rvei te
nta
ng
Kein
gin
an
utk
Mem
inja
m
-P
eratu
ran
yan
g b
elu
mte
rso
sia
lisik
an
dg
nb
aik
Fakto
r y
an
g m
em
bata
si p
inja
man
jan
gka p
an
jan
g:
-In
terven
si
DP
RD3
. Kein
gin
an
-K
ep
erlu
an
dan
a p
en
dam
pin
g
-K
ep
erlu
an
PerD
a t
en
tan
g p
inja
man
-P
ro
ses p
en
ilaia
n l
am
a d
an
ku
ran
g j
ela
s
-P
ro
ses
persia
pan
pin
jam
an
tid
ak
sin
ch
ro
n
den
gan
pro
ses
pen
gan
gg
aran
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
33 Final Report (June 2011)
Ju
ni2
01
1 | D
ecen
tralizati
on
Su
pp
ort
Facilit
y
Pen
ing
kata
n P
ersyarata
n P
inja
man
2.
Men
gh
ap
us k
ep
erlu
an
PerD
a
(u
ntu
k m
en
gh
ind
ari
inte
rven
si
DP
RD
)
Op
si u
ntu
k M
en
ing
katk
an
Persyarata
n P
inja
man
:
1.
Men
gh
ap
us k
ep
erlu
an
dan
a p
en
dam
pin
g
4.
Rekom
endasi
4.
Mem
perb
ole
hkan
pelu
nasan
pin
jam
an
seb
elu
m
akh
ir j
an
gka w
aktu
(b
eb
as d
en
da)
3.
Mem
perb
ole
hkan
pen
gem
balian
dala
m a
nn
uit
as
(p
em
bayaran
ko
nsta
n s
ela
ma j
an
gka w
aktu
)
(d
an
men
gg
an
ti d
en
gan
daft
ar n
eg
ati
f)
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
34 Final Report (June 2011)
Ju
ni2
01
1 | D
ecen
tralizati
on
Su
pp
ort
Facilit
y
Pen
ing
kata
n P
roses P
en
ilaia
n
2.
Men
gh
ap
us k
ep
erlu
an
dan
a p
en
dam
pin
g
(sela
in d
ari kep
erlu
an
utk
pem
belian
tan
ah
)
Op
si u
ntu
k M
en
ing
katk
an
Pro
ses P
en
ilaia
n:
1.
Men
erb
itkan
pro
ses p
en
ilaia
n d
i kem
en
keu
.go
.id
4.
Rekom
endasi
4.
Min
ta P
EM
DA
utk
men
gir
im a
plikasi
di
No
v-D
es
un
tuk m
aksim
al w
aktu
dala
m s
iklu
s a
ng
garan
3.
Men
gh
ap
us k
ep
erlu
an
un
tuk P
erD
a t
tg p
inja
man
(b
iar p
ro
ses t
ran
sp
aran
kep
ad
a P
EM
DA
)
5.
Men
ilai
ap
likasi
pin
jam
an
dala
m m
aksim
al 6
bln
-> m
en
gh
ind
ari
SLA
(ta
pi p
ro
gram
lo
an
OK
)
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
35 Final Report (June 2011)
Ju
ni2
01
1 | D
ecen
tralizati
on
Su
pp
ort
Facilit
y
Pro
gram
Lo
an
un
tuk M
en
dan
ai
MD
F
4.
Rekom
endasi
Men
uju
Mu
nic
ipal
Develo
pm
en
t Fu
nd
(M
DF)
Go
vern
men
t (M
oF
)F
ore
ign
Len
der
Pe
me
rin
tah
Dae
rah
A
Pro
jec
t L
oa
n
(ma
ta u
an
g a
sin
g)
Pin
jam
an
yg
Dit
eru
sk
an
ke
pa
da
Dae
rah
(R
up
iah
)
3%
3%
+T
B
Pe
me
rin
tah
(Kem
en
ke
u)
Pe
mb
eri
Pin
jam
an
A
Fo
reig
n L
en
der
Pe
me
rin
tah
Dae
rah
B1
%1
%+
Tb
Pe
mb
eri
Pin
jam
an
B
Go
vern
men
t (M
oF
)F
ore
ign
Len
der
Pe
me
rin
tah
Dae
rah
A3
%
Mu
nic
ipa
l
Deve
lop
me
nt
Fu
nd
(M
DF
)
Pe
mb
eri
Pin
jam
an
A
Fo
reig
n L
en
der
Pe
me
rin
tah
Dae
rah
B1
%P
em
be
ri
Pin
jam
an
B
Kem
en
teri
an
Keu
an
ga
n R
I
US
UL
AN
SA
AT
IN
I
2%
+T
B
2%
+T
B
Pro
gra
m L
oa
n
(ma
ta u
an
g a
sin
g)
Pin
jam
an
ke
pa
da
Dae
rah
(R
up
iah
)
The Need, Capacity and Willingness of Regional Governments
to Finance Public Infrastructure from Long-Term Loans
36 Final Report (June 2011)
Ju
ni2
01
1 | D
ecen
tralizati
on
Su
pp
ort
Facilit
yTerim
a K
asih
!
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