Indonesia pushes LVC scheme to fund infrastructure projects

By Romel S. Gurky

The Indonesian government is stepping up implementation of its Land Value Capture (LVC) scheme, locally known as Pengelolaan Perolehan Peningkatan Nilai Kawasan (P3NK), to help finance infrastructure development and support its target of achieving 8% economic growth by 2029.

Acting Deputy for Industry, Manpower and Tourism Coordination at the Coordinating Ministry for Economic Affairs, Dida Gardera, said infrastructure development remains a key requirement for achieving the government's growth target, while innovative financing mechanisms are needed to complement limited fiscal resources.

LVC is a financing mechanism that captures part of the increase in land and property values generated by public infrastructure projects and channels those gains back into infrastructure funding. The approach is intended to allow governments, developers and communities to share the economic benefits created by infrastructure investments.

Speaking at a policy discussion on infrastructure financing through the P3NK scheme in Jakarta on Wednesday, Dida said the mechanism is designed to allow stakeholders to share economic benefits generated by rising land and property values resulting from infrastructure development.

The forum was held jointly by the Coordinating Ministry for Economic Affairs and PricewaterhouseCoopers (PwC) Indonesia to support implementation of Presidential Regulation No. 79 of 2024 on Land Value Capture and Coordinating Ministerial Regulation No. 3 of 2026.

Dida said the regulatory framework for P3NK is already in place and the government's focus is now shifting toward implementation, including the development of a pipeline of potential projects, particularly in transit-oriented development (TOD) areas and strategic urban zones.

The government is also seeking greater private sector participation through policy certainty, incentive mechanisms, benefit-sharing arrangements and streamlined licensing processes.

According to Dida, collaboration among government agencies, businesses, financial institutions, regional governments and development partners will be critical to the success of the scheme.

The government plans to advance implementation through project preparation and feasibility studies, including cooperation with multilateral institutions, with the aim of increasing economic value in development areas, improving public services and supporting regional economic growth.

The event also included panel discussions involving regulators and businesses, as well as simulation workshops and coaching sessions on project feasibility studies and the application of P3NK instruments in potential development areas.

Editing by Alexander Ginting