INFRASTRUCTURE

AS PUBLIC
SERVICES
Dr. Mailinda Eka Yuniza, S.H., LL.M.

2023
PUBLIC SERVICES THEORY

(i) Essential utility or infrastructural services, such as water,

sanitation, electricity, etc.

(ii) Social services, such as healthcare, schooling, public housing,

etc.

(iii) Regulatory services, such as issuance of licenses and permits,

etc.
RELATION BETWEEN INFRASTRUCTURE
AND PUBLIC SERVICES

Infrastructure is an important aspect to support economic growth

(Hulten and Schwab)

Government has a role to provide its citizens, and therefore

services delivery through economic and social infrastructure
important to make services accessible for all people

The more accessible the infrastructures in one country, the easier

its citizens obtain their welfare that will affect their economic
growth
Are they all public services?
Can we access it for free?
PUBLIC AND PRIVATE GOODS
Public Goods Private Goods
• Have a non-rivalry and non-excludable characteristic; • There are rivalry and exclusion on its utilization.
• Public goods are aimed for public as a whole; • Addition of private goods will only increase the advantage for certain
public segment.
• Non-rivalry: utilization of public goods for one consumer will not
reduce the opportunity of other consumers to utilize the goods.
• For example: air → if one person enjoy the air, other people
can also enjoy the air with the same condition
• Non-excludable: No one can obstruct someone to utilize the goods
when it is provided.
• For example: national defense service
• Addition of public goods will result the advantage increment for
general public.

A classic example of a non-rival good is a lighthouse: its light aids navigation for all ships in its vicinity without
diminishing the light available to any specific ship. Public goods are inherently non-rival, which means they can
be consumed by large numbers of people at the same time without being depleted.

The combination of non-rivalry and non-excludability in public goods presents unique challenges in their provision and financing,
primarily because they lead to inefficiencies in market-based provision. Private entities may find it unprofitable to produce goods that
they cannot restrict to paying customers, leading to underprovision or complete lack of provision of such goods. As a result, public
goods are often provided by governments or financed through taxation, as these entities can ensure that the goods are available for
the benefit of the public at large, addressing the market failure associated with their unique characteristics.
Question

1. Is it possible to have a payable public good? Example?

2. What kind of methods and circumstances are available for the implementation of payable public goods?
3. What are the challenges and implications of payable public goods?
4.
It is possible to have public goods payable, but this concept requires careful consideration of what makes a good "public" and the mechanisms
through which payments are collected.
There are methods and circumstances under which payment for public goods can be implemented:
• Voluntary Contributions
People might voluntarily pay for a public good if they value its presence or maintenance. This is often seen in donations to public parks, museums, or
broadcasting services. While these goods remain non-excludable and non-rivalrous, the voluntary payments help provide them.
• Government Funding- - Through Taxes
The most common way public goods are made "payable" is through taxation. Governments collect taxes from individuals and businesses and use
these funds to provide public goods like national defense, public parks, and street lighting. In this sense, people pay for public goods indirectly; they
don't pay per use but rather contribute to a collective fund that finances them.
• Creation of Quasi-Public Goods
Some public goods can be transformed into quasi-public goods by introducing some level of excludability. A toll road is a good example. The non-
rivalry property is maintained (to a certain extent, until congestion occurs), but excludability is introduced through tolls. People pay to use the road,
and those who do not are excluded.
• Subscription Models
Subscription models can be introduced for certain public goods, especially digital ones like online databases or digital libraries. While the good
remains non-rivalrous (one person's consumption doesn't affect another's), mechanisms are put in place to exclude non-subscribers, making it a
payable service.

The Challenge of Excludability

The primary challenge in making public goods payable is overcoming the non-excludability characteristic. When goods are easily excludable, it
becomes more feasible to charge users. However, this may transform the good into a club good (non-rival but excludable) rather than a pure public
good.
Implications
While it is theoretically possible to have payable public goods, the implementation must be carefully designed to maintain the nature of public good
while ensuring adequate funding for its provision. This often involves government intervention, voluntary contributions, or creating systems that
allow for some degree of excludability without fully compromising the public good's accessibility to those who cannot pay.
FUNDING IN INSFRASTRUCTURE PROCUREMENT
1. STATE BUDGET (APBN) P
• Expenditures in infrastructure are included annually in APBN through the Law on APBN that will be established each year based on
Article 23 (1) of the 1945 Constitution of the Republic of Indonesia: “The State Budget as the basis of the management of state funds
shall be determined annually by law and shall be implemented in an open and accountable manner in order to best attain the
prosperity of the people”.
Non-Tax State Revenue

Earned from customs, export tax, property tax,

Tax import duty, etc.
• Tax is one of the biggest contributor for state
revenue
• State revenue from tax in 2022: around
Rp1.924,94 Trilion Rupiah (around 70% from
total revenue)* Grant

Grant realization by the end of 2023 reached

more than Rp853,6 Trillion Rupiah, including
infrastructure and transportation.

SOURCES OF APBN
*Data BPS
 State Budget for Infrastructure

Projects funded by APBN

 Construction of the Cirebon-Kroya Double Track Railway
 Construction of Amplas Medan Flyover

EMERGING ISSUES

 APBN is restricted to certain amount, whereas Indonesia is concerned

in infrastructure growth. Related to this, APBN experienced difficulties
to fund the infrastructure procurements.
 A risk of stalled construction project if APBN fails to fund the projects.
 PUBLIC-PRIVATE
PARTNERSHIP (PPP)
Fundamental
Public Private Partnership, hereinafter referred to as PPP, is the
Presidential Regulation No. 38/2015 cooperation between government and Business Entity in infrastructure
concerning Cooperation between provision for the public interest in accordance with the specification
Government and Business Entities in previously determined by the Minister/Head of Institution/Head of
Infrastructure Provision Region/State Owned Enterprise/Regional Owned Enterprise, which
partially or fully uses Business Entity’s resources, with particular regard
to the allocation of risk between the parties.

Derivatives:
• Regulation of the Minister of National Development Planning/Head of the National Development Planning Agency No. 2 of 2020 on
the Amendment to Regulation of the Minister No. 4 of 2015 on Procedures for the Implementation of Public-Private-Partnership
Schemes in the Procurement of Infrastructure
• Head of National Procurement Agency Regulation No. 29 of 2018 regarding Procedure for Procurement in Public Private Partnerships
for Infrastructure Development Initiated by Ministers/Heads of Agencies/Heads of Regions (LKPP Regulation 29/2018)
 CHARACTERISTIC OF PPP

For public infrastructure.

Business entity manage asset until consession period, but the government own the assets.

There is a concept of risk distribution/ allocation between the government and business
entity, and the government provides infrastructure guarantees as a ring fencing of APBN and
ensuring the credibility of infrastructure projects.

Fund resources of PPP can be fully or partially from APBN. The involvement of business entity
can be seen from the value of money of the projects. But, the resources of the infrastructure
procurement can be fully or partially from business entity.
SCOPE OF PPP

• Art. 5 the Presidential Regulation No. 38/2015 → economics and social infrastructure

Centralized waste Local waste water

Water resources and Waste management
Transportation Drinking water water management management
Road Infrastructure irrigation infrastructure
infrastructure infrastructure infrastructure infrastructure
infrastructure system
systems systems

Telecommunications Oil and gas and Facilities and

Electric power Energy conservation Urban facilities Education facilities
and informatics renewable energy infrastructure for
infrastructure infrastructure infrastructure infrastructure
infrastructure infrastructure sport and art

Tourism Penitentiary Residential

Area infrastructure Health infrastructure
infrastructure infrastructure infrastructure
STAGE OF PPP

Planning Preparation Transaction/Procurement Construction Consession Period

• Project • Outline • Pre- • Construction • Operating

identification Business Case qualification • Asset transfer
• Preliminary • Final Business • Request for
study Case proposal
• Auction
• Signing
• Financial close
PRIVATE FUNDING

1. Direct lending from foreign investor

• e.g.: construction of high-speed railway Jakarta-Bandung → 25% by the consortium of BUMN, 75% direct lending from China Development
Bank (non-APBN)

2. Non-Budget Investment Financing (PINA)

• Sources of PINA: direct investment, banking, insurance, capital market, etc.
• example: Trans Java Toll Project with the Equity Fund. At the period of financial closing In the starting stage, by the PINA scheme, the project
was able to earn Rp3,5T from the overall funding gap Rp6,3T.
 QUESTION

If an infrastructure is fully or partially funded by private entity,

and that private entity make profit from the infrastructure, is it
still considered as PUBLIC GOODS?
THANK YOU