The road transport sector in Indonesia has struggled to cope with an exponential growth in demand and insufficient supply, mainly because of long standing and substantial underinvestment, particularly by the provincial governments on the roads under their authority. This has led to imbalanced growth of the network and uneven access—especially in rural areas—across different regions of the country. The sector also faces other major challenges, such as road safety, congestion, and pollution in urban areas.

This project addresses Indonesia’s transport and logistics infrastructure challenges, initially from the demand side and then potentially from the supply side. On the demand side, MCC and DT Global will help the Government of Indonesia identify transport and logistics infrastructure projects that can be delivered through a Public Private Partnerships mechanism and that are financially viable, demand-driven, have a high economic rate of return, and that adhere to environmental, social, and gender criteria as per the Indonesian context and MCC’s guidelines. If necessary, the project may also try to address supply side constraints to increase the available funding for these transport and logistics infrastructure projects, such as by supporting the diversification of financing sources including blended finance and other Public Private Partnership models.

The project is divided into two main categories. Category One focuses on better understanding and preparing Indonesia’s Public Private Partnership enabling environment for these new infrastructure projects that MCC seeks to fund. Category Two focuses on the engineering, assessments. and other due diligence work necessary to help MCC and the Government of Indonesia decide on a final list of infrastructure projects that offer the best return on investment. These infrastructure projects are likely to be in the road, rail, port, and/or logistics sectors.

IMC is providing a broad range of technical advisory support services across activities including due diligence, project development, assessment, design, delivery, and oversight of infrastructure projects as part of Indonesia Compact II development process. Results will include:

• Supporting MCC with producing Terms of References and Implementation Frameworks for operationalizing a Public Investment Manual and Guidelines and Project Preparation Facility, to be used for the procurement of downstream consultants.
• Providing due diligence services on the demonstration projects being supported through Compact II. These projects are in the three target provinces of Riau, South Sumatra, and North Sulawesi.
• Reviewing all project documents provided against a due diligence tracking tool to identify data gaps and to assess project suitability, thus helping MCC to select appropriate candidate projects that meet the objectives of the compact and MCC’s wider objectives.
• Developing a summary of project definitions to support the Project Proposal Assessment Memo that considers technical, environmental, social, gender, economic, Public Private Partnership/financing, and delivery mechanism aspects.