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Socialization of the Palapa Ring East Package Project in Jayapura and Manokwari

Papua | February 23, 2017
The Universal Service Obligation (KPU)-based Palapa Ring project is the construction of a fiber-optic backbone network for the national broadband telecommunications system. It functions as an information highway, connecting all regencies/cities in Indonesia located in areas that are not commercially profitable. The Palapa Ring project is divided into three packages: West, Central, and East. The East Package of the Palapa Ring Project will reach 35 regencies/cities across East Nusa Tenggara, Maluku, Papua, and West Papua, with a total fiber-optic cable length of approximately 8,454 km. The project value is estimated at IDR 5.1 trillion. The Palapa Ring project aims to meet public infrastructure needs, particularly in the telecommunications sector in Eastern Indonesia, and to accelerate the implementation of National Strategic/Priority Infrastructure Projects as stipulated in Presidential Regulation No. 3 of 2016.

The presence of the Palapa Ring East Package will provide significant benefits for people in Eastern Indonesia, including:
  1. Eastern Indonesia can catch up with telecommunications infrastructure development, eliminate slow and expensive internet, and data connectivity needs can be met properly. This can be a step towards accelerating development and economic equality throughout Indonesia.
  2. People in eastern Indonesia will have the same good communication access as people in western Indonesia (Java), or around 7 Mbps.
  3. Telecommunications service prices can be cheaper for people in Eastern Indonesia.
  4. Improving education through internet facilities and
  5. Can open new business opportunities for Small and Medium Enterprises (SMEs) in remote areas and improve people's standard of living through digital-based community economic activities.
The Palapa Ring Project implementation model is a Public-Private Partnership (PPP) in the telecommunications sector, implementing an availability payment (AP) scheme. The availability payment scheme was initiated by the Ministry of Finance, and the funding source for the availability payments comes from the Universal Service Obligation (USO) Contribution Fund.

The availability payment (AP) scheme, regulated in Minister of Finance Regulation No. 190/PMK.08/2015, is a periodic payment during the concession period based on the availability of infrastructure services built by the business entity. The AP components that can be paid are capital costs, operational costs, and a reasonable profit desired by the business entity. Under this scheme, the demand risk associated with the availability of infrastructure services is fully borne by the Contracting Agency (GPA), namely the Ministry of Communication and Informatics. By taking on this risk, the business entity receives a return on their investment if they achieve the service criteria agreed upon in the Cooperation Agreement. For the Palapa Ring Project's Central Package, the total AP reaches approximately 4 trillion rupiah, which will be paid periodically over the 15-year concession period. The continuity of payments from the Contracting Agency (GCA) to business entities will be guaranteed by the government through the Indonesian Infrastructure Guarantee Fund (PT Penjaminan Infrastruktur Indonesia/PII). The Palapa Ring Project demonstrates the government's commitment to collaborating with business entities (investors) in infrastructure development in Indonesia. Various parties, such as the National Development Planning Agency (BAPPENAS), the Ministry of Finance, and PT PII, have supported the Palapa Ring Project to date, enabling the project's preparation process to proceed relatively quickly, effectively in less than a year. This project has received support in the form of transaction facilitation assistance (PDF) and a Principle Permit for Availability Payment from the Minister of Finance.

For information, the progress of the Palapa Ring East Package Project:
  • On September 29, 2016, at the State Palace, the Cooperation Agreement (PKS) for the Palapa Ring East Package was signed by the Minister of Communication and Informatics as the Project Manager (PJPK) and PT Palapa Timur Telematika. This was witnessed by the President of the Republic of Indonesia, the Coordinating Minister for Political, Legal, and Security Affairs, and the Coordinating Minister for Economic Affairs as Chair of the Committee for the Acceleration of Priority Infrastructure Provision. PT Palapa Timur Telematika, the Implementing Business Entity (BUP) formed by the Moratelindo, IBS, and Smart Telecom consortium, is the winning bidder for the Palapa Ring East Package Project.
  • PT Palapa Timur Telematika is currently completing the financial close required to commence construction.
  • Construction and deployment of fiber optic cables are expected to commence for the Palapa Ring East Package Project this semester and are expected to be completed in 2019. Simultaneously, other telecommunications providers are expected to build access networks, such as BTS (telecommunication towers), so that broadband access services can be rolled out to the public.

About PT Palapa Timur Telematika:

PT Palapa Timur Telematika (PTT) is an Implementing Business Entity (BUP) appointed by the Government, namely the Ministry of Communication and Informatics of the Republic of Indonesia, to implement the Palapa Ring East Project based on Cooperation Agreement Number: 1425/M.KOMINFO/HK.03.02/09/2016, Number: 2901/PTT/PD-DIR/IX/2016 dated September 29, 2016, concerning the Development and Management of the Palapa Ring East Package Fiber Optic Backbone Network.:

News & image sources: Kominfo