Urip Hudiono, Jakarta – Two key economics ministers have given assurances that Indonesia is committed to addressing the concerns of investors hoping to participate in infrastructural development in Indonesia, having instituted a number of significant reforms over the past year.
Better project execution, smoother land acquisition, and the putting in place of risk-sharing and guarantee schemes are the government's main focuses in answering those concerns, according to Coordinating Minister for the Economy Boediono and Finance Minister Sri Mulyani Indrawati.
The two ministers were speaking during Wednesday's opening discussions with potential investors attending the three-day "Indonesia Infrastructure Conference and Exhibition 2006".
It would seem that the government has learned its lesson, as it was precisely the absence of such guarantees that resulted in the failure of last year's high-profile Infrastructure Summit to attract significant interest from investors.
In terms of improving project implementation, Boediono said the government had established a "project-development fund" to pay for detailed feasibility studies for proposed projects, and to ensure that tender documents were drawn up in compliance with international best practice.
Boediono said that this would ensure that all the proposed projects would be ready to start immediately after the completion of the tender process, thus avoiding additional costs along the way. Assistance from the fund would be provided on a competitive basis for high-priority projects.
Boediono also said the government had issued President Regulation No. 36/2005, as amended by Regulation No. 65/2006, on land acquisition to expedite the process and prevent the cost of project land spiraling out of control as a result of the actions of speculators.
"We all know too well that private investors are reluctant to enter into concession agreements when significant uncertainties about land acquisition remain," he said.
To overcome this, he said the government had set up a "revolving land fund" that had been provided with seed capital of Rp 600 billion (US$65 million) so far. Using this fund, the government would acquire the land needed for important projects, with the investors reimbursing it by installment as the projects began to generate revenue.
Finance Minister Sri Mulyani Indrawati, meanwhile, highlighted the government's commitment to supporting infrastructural development through Finance Minister's Regulation No. 38/2006 on risk-sharing in infrastructure projects.
She said the government had established an "Infrastructure Investment Fund", to which it had allocated Rp 2 trillion out of the state budget in each of the years 2006 and 2007.
This scheme basically envisages the provision of financial compensation for any political risks – including policy changes – that adversely affect a project. It also envisages the extension of concession periods and the sharing of cost overruns arising from any delays in a project or lower demand for a project's output.
However, Sri Mulyani stressed that the risk-sharing and guarantee schemes could only be availed off on a case-by-case basis based upon the legality, quality, affordability and transparency of each project in order to safeguard the interests of the public at large.
"We will be pragmatic and careful as we want the projects to be sustainable and really benefit the public," she said. "We want to give support, but we now have to do things under a new set of laws that emphasize transparency and accountability in this atmosphere of democracy. I'm sure you investors can understand this."