Government introduces land value capture scheme for regional infrastructure financing

By Rara Suratmi

The government has introduced a land value capture financing framework aimed at helping regional administrations fund infrastructure projects amid fiscal constraints, according to the Coordinating Ministry for Economic Affairs in its Tuesday release.

The framework is regulated under Coordinating Minister for Economic Affairs Regulation No. 3 of 2026 on infrastructure financing through land value capture, locally referred to as P3NK.

Acting Deputy for Industry, Manpower and Tourism at the ministry Dida Gardera said the scheme allows regional governments to capture part of the economic value increase generated by infrastructure development and reinvest the proceeds into other public projects.

He said the mechanism is designed to create sustainable financing sources outside the state budget and regional budgets.

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Under the scheme, local governments may implement projects through various institutional arrangements, including regional government agencies, public service agencies, or region owned enterprises.

The ministry said the financing cycle under the framework includes planning, value creation, value capture, and reinvestment into infrastructure funding.

The regulation serves as an implementing guideline for Presidential Regulation No. 79 of 2024 on land value capture financing.

The ministry said most investment and development projects are located in regional areas, making local governments important drivers of national economic growth through investment facilitation and infrastructure development.

The ministry also encouraged regional governments to identify pilot projects that could be developed under the financing scheme.

Editing  by Alexander Ginting