Patriot Bond Finances WTE Project, Potential For High Economy But Fiscal Risk Lurking

Rupiah (unsplash)

JAKARTA - Head of the Indef Macroeconomic and Finance Center, M Rizal Taufikurahman said that the use of Patriot Bond funds of IDR 51.75 trillion for the Waste to Energy (WTE) project in principle supports two strategic agendas at once, namely energy transition and waste management.

He conveyed that from an economic perspective, the WTE project has significant multiplier effect potential, both through job creation, strengthening supply chains, and saving environmental externality costs.

According to him, the realization of these benefits relies heavily on a number of important factors, such as certainty of electricity purchase contracts (Power Purchase Agreement), operational cost efficiency, and the extent to which local industries are involved in the project.

"Without clarity on adequate regulations and fiscal designs, WTE risks becoming a capital-intensive project with a low level of return and high dependence on government incentives," he told VOI, Thursday, October 2.

He said strategically, the success of Patriot Bond in attracting green or ESG-based investors can only be achieved if the governance and credibility aspects of the environment are seriously maintained.

According to him, this means that the measurable ESG indicator and the verification process by third parties are absolute prerequisites for building the trust of international investors.

Rizal conveyed that with strong governance and institutional discipline, Patriot Bond has the potential to become an innovative instrument in financing the energy transition agenda and environmental management.

However, he added that without good management, this project not only risks being a means of capital mobilization by the elite, but also fails to provide broad and sustainable economic benefits.

Rizal also emphasized that fiscal risks must still be watched out for, even though funds are raised from the private sector, there are guarantee schemes such as Power Purchase Agreement (PPA), tipping fees, or fiscal interventions when projects fail, potentially creating large consent liabilities for the state budget.

"Hal ini menuntut desain tata kelola yang ketat, termasuk ringfencing penggunaan dana, mekanisme pengadaan yang transparan, serta audit independent yang berkelanjutan," pungkasnya.