De‐risking at the Limit? State‐owned Enterprises and the Politics of Financialized Infrastructure Development in Indonesia

ABSTRACT The need for emerging economies to develop infrastructure in order to drive catch‐up growth has become a common refrain in policy circuits. The dominant norm promulgated and disseminated by global development institutions to countries facing infrastructure deficits is the public–private partnership (PPP) model of project finance, a market‐based model that seeks to transform infrastructure into a financial asset. Institutionalizing this model requires the deepening of market rationality in governance and the establishment of markets for infrastructure projects and infrastructure debt, underpinned by regulatory and institutional changes aimed at de‐risking global investments. However, this model is neither overriding nor monolithic. It is contested, modified and augmented by alternative state‐led models, rationalities and practices, animated by developmental politics. The article examines the embeddedness of the PPP model in Indonesia, where it is selectively appropriated by politicians and bureaucrats in line with state development objectives by mobilizing state‐owned enterprises (SOEs) as developers, insurers and financiers of infrastructure projects. Beyond establishing the conditions for market exchange and de‐risking capital, the state, through SOEs, is an active market participant, competing and partnering with private sector actors, while advancing state‐led alternatives where the market‐based model fails to address development needs. This case highlights the potential for developmental politics to shape the broad use of capital in the face of disciplinary pressure from global finance.