Abstract
The COVID-19 pandemic has caused direct impacts on global economics, and Indonesia is no exception. Based on World Bank data, the GDP growth of Indonesia has declined from +5.02% in 2019 to -2.07% in 2020. On the contrary, Reuters reported that the GDP growth of Indonesia is +7.07% in the second quarter of 2021. This situation could be taken as the best momentum to push economic recovery, and further will attain economic transformation to get out of the middle-income trap as part of achieving Indonesia’s big vision in 2045. One of the Government of Indonesia (GoI) efforts to push economic recovery is through the development of the New Capital City in East Kalimantan despite the pandemic in order to boost investment. New Capital City development project as an opportunity to encourage investment climate and economic growth as it is projected to give multiplier effect due to pandemic, for instance, attracting more investors, increasing mobility and labour opportunities, especially in the construction sector, as well as boosting the aggregate demand and the supply of the economy. Infrastructure performance is vital to economic development, and it is critical to enable labour mobility and stimulate economic activities. Nevertheless, Indonesia is financially insufficient with limited public funds. According to Ministry of National Development Planning estimation, GoI is only capable of fulfilling 19,4% from the total of IDR 519 Trillion infrastructure funding need until 2024, whereas the funding gap of 80,6% can be accomplished through alternative financing schemes, one of which is Public-Private Partnership (PPP) scheme. PPP involves a collaboration between the public and private sectors to raise capital funding by reducing the government budget and improving the inclusivity projects. PPP scheme exploration is a way to enhance the country’s competitiveness in terms of infrastructure facilitation and promote its business and industry related to infrastructure development. The PPP scheme will be used in the first stage (2020-2024) of New Capital City infrastructure development, namely housing, government office, roads and bridges, and other supporting infrastructures. Based on the Ministry of National Development Planning prediction, the impact of New Capital City development can accelerate economic growth through eight economic clusters, such as future education, sustainable manufacturing, smart city and center of digital technology, pharmaceutical, agri-based clusters, ecotourism, and health, advanced pharmaceutical, and sustainable coal, that will develop regional economic by four to five times to approximately USD180 Billion. In addition, the New Capital City development is estimated to create around 4.3 to 4.8 Million job opportunities in East Kalimantan in 2024. By using a literature review on the concept of PPP and The New Capital City development plan, this study will elaborate the potential of PPP implementation in Indonesia’s New Capital City development as a new paradigm in sustainable infrastructure financing relating to economic recovery from the impact of the COVID-19 pandemic. Key words: Infrastructure Development, New Capital City, Public-Private Partnership, Sustainable Financing.
