[Indonesia] New PPP Procurement Rules for Infrastructure Take Effect in Indonesia: Foreign Entities Allowed to Directly Bid on Water and Other Infrastructure Projects, Rewriting the "Entry Rules" for Chinese Enterprises in Indonesia's Water Market

Introduction: The Regulation No. 1 of 2026年 issued by the Indonesia National Public Procurement Agency (LKPP) was published and took effect immediately on 30日 7月, establishing a new operational framework for selecting private partners in Indonesian PPP (KPBU) projects, applicable to infrastructure projects in sectors such as water and sanitation; the new regulation explicitly grants foreign legal entities the eligibility to bid, and requires that the lead enterprise of a winning consortium hold more than 50% equity in the project company, with projects expected to attract foreign investment required to be announced in international-level media.

From "Ambiguous Wording" to "Clear Legal Status": Foreign Bidding Eligibility Explicitly Stated for the First Time

Indonesia is the world's fourth most populous country, with a huge gap in municipal sewage and water supply infrastructure: the urban sewage treatment rate has remained low for a long time. Outside the metropolitan areas of Jakarta and Surabaya, there is strong demand for water supply coverage and sewage collection and treatment, while groundwater over-extraction and land subsidence are further driving investment in pipeline networks and centralized treatment facilities. For a long time, the biggest uncertainty faced by foreign enterprises participating in Indonesian water PPP projects has not been market demand, but rather "procedural identity" — the old procurement regulations were ambiguous about whether foreign legal entities could directly participate in bidding as private partners. In practice, participation often required local partners to hold shares on their behalf or complex structural arrangements, resulting in persistently high compliance costs and uncertainty.

The newly effective Regulation on Procurement Procedures for Infrastructure Cooperation between Government and Business Entities (Regulation No. 1 of 2026年) was issued by the Indonesia National Public Procurement Agency (LKPP) on 30日 7月 and took effect immediately, replacing the old regulation 2025年 and unifying the operational framework for selecting private partners in government-private cooperation (known as KPBU in Indonesia) projects. The core breakthrough is: foreign legal entities are explicitly granted bidding eligibility and may participate individually or as consortium members in infrastructure PPP projects in sectors such as water and sanitation. This wording means that foreign enterprises have gained "legal recognition" at the regulatory level, no longer needing to rely on ambiguous structural arrangements, and the certainty of bidding status has been significantly enhanced.

Dual Requirements on Equity and Transparency: Consortium Leader Must Hold Over 51% Equity, Foreign-Related Projects Require International Announcement

The new regulation is not a one-way door — supporting constraints have been tightened simultaneously. Two provisions deserve close study by water enterprises planning to enter Indonesia:

• Consortium controlling equity requirement — The lead enterprise in a winning consortium must hold more than 50% equity in the project company. In the past, foreign enterprises typically formed teams with local partners holding minority equity, with local enterprises maintaining control to facilitate project implementation; after the new regulation takes effect, the rule of "whoever leads must control" will reshape consortium negotiation dynamics. If foreign enterprises wish to lead project operations and financial consolidation, they must directly serve as the lead party and satisfy the controlling equity requirement, or accept a subordinate position as financial/technical investors.
• International announcement requirement — Projects expected to attract foreign investment must be announced in international-level media or international infrastructure project information websites. This provision enhances the transparency and accessibility of project information, representing a significant advantage for Chinese water enterprises, engineering contractors, and membrane equipment suppliers: the former "information gap" that relied on local information networks has been institutionally leveled, allowing international investors to access bidding information within the same time window — competition is more open, and opportunities are more accessible.

In terms of procedural design, the new regulation retains the dual channels of government-initiated tendering and unsolicited proposals, and offers variants such as one-stage tendering and two-stage tendering, balancing procurement efficiency with flexibility for complex projects. For foreign enterprises with mature technical solutions and investment and financing capabilities, the unsolicited proposal channel remains a strategic pathway to enter Indonesia's incremental water projects.

Three Practical Recommendations for Chinese Enterprises Entering Indonesia's Water Sector

First, redesign the bidding structure in advance. Facing the hard constraint of "leading means controlling," Chinese enterprises need to clarify their role positioning before bidding: if the goal is to lead operations, they should pursue the lead party position and design a shareholding structure of more than 51%, while simultaneously assessing financial consolidation and risk exposure; if the focus is on equipment supply and engineering technology export, they can enter as consortium members, securing long-term supply and O&M service agreements.

Second, reassess the value of local partners. With the "legal status" of foreign enterprises clarified, the value of local partners has shifted from "qualification channels" to "factor supply" — localization capabilities such as land coordination, permit processing, community relations, and financing guarantees have become the core criteria for selecting partners. Local state-owned enterprises with water operation experience and regional leaders will become sought-after teaming partners.

Third, closely monitor project announcement windows in the water and sanitation sectors. The new regulation imposes international announcement requirements on projects expected to attract foreign investment. It is recommended to continuously track water-related KPBU announcements on the Indonesia National Public Procurement Agency (LKPP) platform and international infrastructure project information websites, with particular attention to three types of opportunities: the Jakarta metropolitan area sewage system upgrade, regional water supply SPAM projects, and integrated water supply and wastewater projects in industrial parks.

Looking at a longer cycle, Indonesia is on an upward trajectory of infrastructure investment. The "Maritime Nation" strategy and the demand for water supply and drainage systems in the new urban areas brought by the construction of the new capital Nusantara will provide foreign-funded water enterprises with a decade-long market space. The enactment of Regulation No. 1 of 2026年 has essentially redrawn a clear starting line for this long race — the rules are more transparent, competition is more direct, and enterprises that complete their structural design and partner layout first will gain the upper hand.

About TIANYI TECH: TIANYI LIMITED has long been focused on the cutting-edge developments in global Water Environment Governance and water resource recycling, deeply engaged in technical information and industry services in the fields of wastewater treatment and Reclaimed Water Reuse, and is committed to providing timely and professional industry insights and solution references for clients and industry partners.