PSN: Building the nation, but at what cost?
The quest to accelerate economic growth leaves questions unanswered.
About a week after President Prabowo inaugurated a total of 77 National Strategic Projects (Proyek Strategis Nasional, or PSN), protests erupted in Merauke, where indigenous communities across Papua, Sumatera, and Kalimantan gathered to demand the government to stop the continuation of PSNs affecting their lands.
“Stop! Enough! We have suffered enough,” cried an indigenous woman in the Merauke consolidation meeting between affected communities and the South Papua government, reported by BBC Indonesia.
Dozens of human rights violations complaints have been recorded in relation to the PSNs, according to Komnas HAM. But the new administration, through the Presidential Regulation (Perpres) Number 12/2025, has announced 29 new PSNs and 48 projects carried over from Jokowi’s term, including food estate projects which sparked the aforementioned Merauke protests.
The new PSNs include the free meal program (Makan Bergizi Gratis, or MBG) — Prabowo’s campaign centrepiece that is not without its faults, which we’ve covered in The Reformist’s previous volume — and projects focusing on water and food self-sufficiency, as well as the sea wall and transport sector projects (see the full list of PSNs here).
Amidst allegations of human rights violations, threats of environmental degradation, and protests from communities impacted by the development, why does the new administration insist on making PSN, a Jokowi legacy, once again a priority?
PSN was Jokowi’s idea of how Indonesia could accelerate its economic growth. The idea was that if infrastructure development could be ‘fast-tracked,’ the economic benefits that come with it, too, could be enjoyed quicker. In one way or another, it was a reform—but at what cost?
In this volume of The Reformist, we will look deeper into PSN and whether or not the ‘reform’ it promises is really worth the challenges and pushbacks that come with it. We will dissect:
What is PSN
Why (the idea of) it was (probably) a game-changing reform
The reality of how PSN is implemented on ground
How we can make it a better reform
I. PSN and the promise of economic growth
PSN is a designation awarded to infrastructure projects that the government deems to be important enough to prioritize in its development, largely because it aligns with the aim of PSN to increase economic growth.
To do this, potential PSNs are studied against the National Medium-Term Development Plan (Rencana Pembangunan Jangka Menengah Nasional, or RPJMN) to deduce whether the project would significantly and strategically contribute to state development.
In this respect, the aims of PSN are:
enhancing economic growth and equitable development,
increasing employment opportunities,
improving community welfare,
expanding national connectivity, and
advancing state-wide infrastructure.
PSN designation is a game-changer for infrastructure projects that receive it. Through PP No. 42/2021, government regulation outlines an amalgamation of perks associated with the designation, all of which aim to fast-track progress of the project, ostensibly so that the economic benefits of these strategically important projects can be experienced much quicker.
To do this, the progress of PSN projects is accelerated through five main approaches:
The projects receive government assurance (Jaminan Pemerintah), increasing project feasibility by introducing a risk-sharing scheme to support project implementation.
As PSNs do not always use the state budget (Anggaran Pendapatan dan Belanja Negara, or APBN), projects can use development funds from public-private partnerships (Kerja sama Pemerintah dan Badan Usaha, KPBU). This means that KPBUs are encouraged and facilitated through the PSN status, allowing PSNs to be better funded than other projects.
PSNs benefit from simplified permits through expedited legal processes that are enabled by the government – in fact, under Article 4g, government stakeholders are expected to “facilitate the resolution of problems” that may arise in business licensing and land acquisition.
Projects are given the advantage of smoother legal resolutions using streamlined administrative procedures that aim to examine public complaints within five days, and begin an inspection within 30 days should there be indication of wrongdoing.
Government stakeholders take on most of the responsibility associated with the social consequences that may be associated with PSN implementation.
Suffice to say, a PSN designation is a coveted thing – meaning the selection criteria must be strenuous… right?
As mentioned earlier, the foundational criterion for a project to be considered for PSN status is to align with RPJMN and the state’s broader strategic plans for infrastructure, meaning the project must conform to planned spatial and regional layouts. When this is fulfilled, the requirements can then be divided into two categories: strategic and operational.
In the realm of strategic criterions, PSNs benefit the country in areas such as the economy, social welfare, national defense, connectivity, and equal opportunity between islands.
Meanwhile, operational criterions include a pre-feasibility study and an investment value of over IDR 100 billion (or, the project has a “strategic role” in encouraging regional economic growth). PSNs must also prioritize the use of domestic resources, and can be led by central government, regional governments, or business entities.
II. PSN as a reform: Why we needed it (probably)
It may be difficult to believe, but designating certain infrastructure projects as priorities through the PSN status was a government reform. Poor inter-island (and intra-island) connectivity driven by tangled legislation and unclear regulation, along with distinct regional disparities in development, has made infrastructure a key area for Indonesia so that the state can push forward its development.
After the 1998 Economic Crisis, Indonesia was left with a proportionally low budget for infrastructure development, which fell from 9% of total GDP in the mid-1990s to 2% in 2001. While the infrastructure budget steadily increased in the years following, state infrastructure progress continued to lag behind ideal standards.
Bambang Brodjonegoro, then-Minister of National Development Planning, stated in 2020 that Indonesia’s infrastructure availability was only 43% (still lower than the 49% infrastructure availability of pre-1998 Indonesia). This is significantly behind the 70% competitive standard for emerging markets across the globe.
As poor infrastructure has been proven to reduce economic growth, the Jokowi administration began propelling infrastructure as the key aspect of state development. During the 2015-2019 period, Bappenas dedicated IDR 4,796.2 trillion to infrastructure (41.3% of which was from APBN, 22.2% from BUMN, and 36.5% from private funding) with the noted expectation that this budget is expected to expand in the coming years.
With this shift towards infrastructure as a key space of state development during the Jokowi administration, PSNs provide a way to allocate increased funding into state infrastructure. Bappenas noted that KPBUs on average account for 7.5% of infrastructure investment in developing countries—Indonesia fell short with roughly 2% KPBU-supported projects.
This backdrop meant that the PSN designation was created as a way for infrastructure to be prioritized in state development. Encouraging KPBU would allow for increased and diversified infrastructure investment to strategically accelerate state development.
III: Issues with PSN implementation
In September 2022, a publication by the Ministry of Finance reported that the PSN program had facilitated 208 projects and ten programs since its inception, with a total investment of IDR 5,739.7 trillion from various sources. This included IDR 714.5 trillion from APBN/APBD, IDR 1,112.1 trillion from BUMN/BUMD, and IDR 3,913.2 trillion from the private sector.
Notably, this means that the private sector contributed a majority 68.17% of funding for PSNs, displaying a significant shift towards KPBUs encouraged by the PSN framework. By this one indicator of increasing private sector funding for infrastructure, one could argue that PSN has succeeded. There’s more money being invested into infrastructure, what more do the people want?
Well, a lot more, and a lot better – understandably so.
There are several key issues that observers have identified in the implementation of PSNs, arguing that the projects are poorly implemented to the point of being useless for state economic growth, or even flat out harmful towards economic development. These issues range from poor environmental consequences to weak governance, and from social dissatisfaction to low public safety – which makes it difficult to figure out where to start.
Perhaps the most recent issue to catch public attention is the questionable selection of conglomerate-owned infrastructure projects for PSN status. In addition to crucial projects such as highways and railways, the PSN designation was controversially awarded to prominent projects Pantai Indah Kapuk (PIK 2) and Bumi Serpong Damai (BSD), largely because both projects were commercially funded, and based in the urban Jabodetabek area.
This led to allegations that the selection of PIK and BSD as PSNs was driven by political motivations, particularly considering investor—namely, conglomerate Sinarmas Land and business tycoon Sugiano Kusuma (a.k.a. Aguan)—connections to other major projects such as the construction of the new capital (IKN), Nusantara.
Additionally, the idea that PIK and BSD are infrastructure projects critical to economic development felt laughable to many onlookers, who deem the projects as high-end real estate developments catering to affluent urbanites rather than projects with a broad, long-term impact on national infrastructure needs. This fundamentally contradicts the intention of PSN programs to support funding for infrastructure projects that normally may find it difficult to do so.
That said, these selections have been removed from the current list, which does not state PIK 2 and BSD, but counts Prabowo’s MBG (free nutritious meal) program and heightening of “beef and milk production” as key projects in the next few years.
Essentially, despite differences in this administration, there is still a lack of clarification of how PSNs are selected. Do these programs really fulfill state needs? How do we measure this?
Do PSNs work?
When a project is selected, what usually happens? Ideally, it changes everything.
Essentially, PSN status tends to accelerate a variety of transformations—largely, and perhaps controversially, in line with wider government policies. For example, the PSN-designated Bintuni Industrial Estate in West Papua is designed to support downstreaming (hilirisasi) efforts in the petrochemical sector.
In theory, PSNs function as catalysts for regional development, positioning infrastructure as the backbone of economic growth. However, PSNs have been subject to controversy due to protests about the social displacement and environmental consequences of many projects.
Perhaps the most notorious of these projects is the creation of industrial hub Rempang Eco-City, which includes a $11.6 billion glass factory by a Chinese firm.
The country claims that this project will create up to 300,000 jobs and long-term investment projected to reach IDR 380 trillion – if only residents from Rempang would leave the island. While some residents have volunteered to leave and move into government-provided housing, a notable majority opted to stay, leading to widespread protests and violent interactions.
Concerns have also been brought up by environmental groups, who point out that environmental consequences will also have a baseline negative long-term impact on state economic growth.
The construction of the eco-city will involve the extraction of local marine resources, which will threaten the biodiversity and sustainability of surrounding marine ecosystems. Extracting the sand for the glass factory, in particular, risks damaging coral reefs and disrupting the marine food chain. The eco-city also threatens fisheries, contributes to coastal erosion, and accelerates climate change due to massive industrialization that will destroy climate resilience.
Regardless, Minister of Investment Bahlil Lahadalia has gone on record in previous years to state that the amdal (Analisis Mengenai Dampak Lingkungan Hidup, or Environmental Impact Assessment) for this project has been released. This means the government has evaluated the environmental impact of the eco-city construction and greenlighted it anyway.
Loosening regulations?
To push the establishment of PSNs, the government has intentionally created loose regulations so as to accelerate development. This confuses both state and commercial actors, causing unclear steps to project development.
Take the East Kalimantan Fertilizer Industrial Area in Papua, where construction began without a completed amdal. In state regulation, there is no indication that projects do not need an amdal (... environmental studies must be completed in accordance with existing legislation). But, there is a clause that assures “kemudahan” or convenience, ‘ease’ for PSN projects.
This means that there are many PSN cases in which environmental measures are lacking, and the impact on climate resiliency is questionable at best. In this sense, PSNs are given preferential treatment not only because the law demands it, but because the law has loopholes that just… allow it to happen.
These social, environmental, and governance issues are compounded by numerous other issues such as corruption and a disregard for public safety.
While PSN should streamline infrastructure processes, the misappropriation of funds continues to be a serious problem. In early 2024, it was reported that as much as 36.67% of funds were diverted from public interests into the pockets of officials and politicians.
Additionally, there has been a high incidence of construction failures, such as the two-time collapse of Depok-Antasari toll road, among numerous other cases. These incidents suggest systematic flaws in project management, from procurement processes to quality control, where corruption and cost-cutting has compromised long-term durability.
This also triggers public skepticism about whether PSNs truly prioritize public welfare and state development, or simply exist as vehicles for politico-corporate gain.
Where is any of the data?
Last of all, and inevitable to any installment of The Reformist, is the issue of limited data. Save for the Ministry of Finance publication, there is no streamlined and updated resource to track the selection, construction, completion, and success of PSNs.
As discussed in most of our coverage thus far, there is the distinct lack of a standardized reporting framework. This makes it difficult to evaluate whether or not the PSN has been an overall net positive reform for Indonesia, further undermining public trust in PSNs as a whole.
Although there is perhaps an argument for the prioritization of incoming PSNs, there is no clear evidence that PSNs have contributed to state development. As of publication, publicly-available resources related to specific achievement of PSNs projects have been difficult to access, or altogether non-existent.
IV: Reforming the reform
It would be hard to argue that the PSN program should be completely terminated. After all, there is a need for strategic infrastructure development to support Indonesia’s economic growth and national connectivity.
However, significant reforms are necessary to ensure that the program delivers progress without perpetuating corruption and political elitism.
Here are several reforms that can be applied to the PSN program:
A stricter selection criteria
This is a foundational reform. The process for granting PSN status should be revised to ensure that projects are aligned with RPJM and would otherwise be unable to receive funding. Taking into account the goal of ensuring equitable growth across islands, emphasis should be placed on large-scale projects beyond those in urban areas. Transparency in project selection, including public disclosure of evaluation metrics, should be mandated to prevent politically-motivated designations.
Clearer regulation
This is important particularly considering that PSNs depend on looser—rather than stricter—regulation. If regulation is not strict, it must at least be clear. There should be a clear outline of what licenses are needed for PSNs, as well as how the processes are streamlined.
Amdals should be non-negotiable for PSNs, and conducted transparently to be consistent with enforcement mechanisms. This would help prevent regulatory loopholes and ensure that large-scale infrastructure projects align with broader sustainability goals.
Reforming the capacity of local governments
This is crucial to ensuring that project implementation is satisfactory. This would also allow for tighter accountability in decision-making, as local authorities would have a clearer role in monitoring and enforcing compliance to national standards.
Strengthening local capacity may manifest in a variety of ways, including through the provision targeted training, resources, and technical expertise to ensure that local governments can effectively oversee PSNs and assess project feasibility as well as long-term impact.
Importantly, decentralizing certain decision-making powers could lead to more context-sensitive project management, ensuring that local conditions, environmental concerns, and community needs are fully considered.
Within this same vein, clarifying the balance of authority between national and subnational governments would reduce bottlenecks in the approval process while maintaining high standards of accountability.
Unmet potential without reforms
The PSN program could be key to promoting equitable development without reinforcing corruption or political favoritism. If the country chooses to introduce stricter and more transparent project selection criteria, clearer regulatory frameworks with non-negotiable environmental standards, and stronger enforcement mechanisms, the PSN does have potential to assist acceleration of economic development. However, the current implementation of PSN is unlikely to fulfill its promise of strategic national development without decreasing public trust and long-term sustainability.