Indonesia’s Ministry of Public Works has issued Minister of Public Works Regulation No. 2 of 2026 on Procedures for Business Entity Initiatives in Toll Road Concessions (“Permen PU 2/2026”), replacing Minister of Public Works and Housing Regulation No. 23 of 2021. The new regulation signals the Government’s intention to strengthen the legal and commercial framework for unsolicited toll road public-private partnership (“PPP”) projects amid increasing dependence on private capital to support infrastructure development.

The regulation was introduced against the backdrop of continued fiscal constraints and the Government’s need to accelerate toll road expansion through greater private sector participation. During the regulation’s dissemination event, the Directorate General of Infrastructure Financing (“DJPI”) emphasized that toll road infrastructure remains strategically important for national connectivity, economic growth, and regional development, while acknowledging that state funding alone is insufficient to meet infrastructure demands. As a result, PPP schemes, particularly business entity initiatives or unsolicited proposals, are expected to play a larger role in future toll road development.

Permen PU 2/2026 appears intended to address a number of practical and commercial issues encountered under the previous regime. While the prior regulation already established the framework for unsolicited proposals, market participants continued to face concerns relating to project bankability, land acquisition risks, compensation mechanisms for project initiators, and regulatory certainty during project preparation and tender stages.

One of the most notable features of the new regulation is its stronger emphasis on financial discipline and investment feasibility. Business entities proposing toll road projects must now demonstrate that proposed projects satisfy both economic and financial feasibility standards. The regulation introduces clearer financial benchmarks, including requirements relating to weighted average cost of capital (WACC), internal rate of return (IRR), net present value (NPV), and bankability assessments. This suggests a policy shift toward ensuring that unsolicited projects are commercially viable from the outset and less reliant on excessive government support.

The regulation also provides more detailed provisions on project preparation and risk allocation. Among others, it regulates compensation mechanisms and additional value rights for project initiators, land acquisition financing arrangements, consortium structures, project transfer mechanisms, and procedures relating to the change or revocation of initiator status. Permen PU 2/2026 further introduces references to environmental, social, and governance (ESG) considerations as part of project assessment and implementation.

Taken together, these revisions indicate an effort by the Government to recalibrate Indonesia’s unsolicited toll road PPP framework by improving legal certainty, strengthening governance standards, and increasing investor confidence. For infrastructure sponsors, lenders, and investors, the regulation may therefore be viewed not merely as an administrative update, but as part of a broader policy direction toward more disciplined, investable, and risk-allocated infrastructure projects.