The Impact of Government Capital Expenditure Effectiveness Including Public-Private Partnership Involvement on Economic Growth: Evidence in Indonesia

Abstract

The purpose of this study is to examine the effect of government capital expenditure effectiveness, including public-private partnership, on Indonesia's economic growth. This study examines the cost-effectiveness of public-private partnerships in Indonesia over a 17-year period, contrasting its efficacy before and after the implementation of public-private partnerships. On a 5% significance level, it was determined that RGCE (The ratio of government spending for the infrastructure sector to total expenditures) and RPPP (The ratio of contract value of public-private partnership project to total government spending for the infrastructure) negatively affect Gross Domestic Product growth of Indonesia but have no significant effect. However, Inflation and Foreign Direct Investment had marginally positive effects on GDP growth. In addition, there is no significant difference between the cost efficacy of government capital expenditures before and after the PPP period. In this analysis, the relatively modest cost of implementing a PPP endeavor is deemed to have a significant effect.