Hans David Tampubolon, Jakarta – The condition of infrastructure development in Indonesia is currently in a state of emergency and the government must start developing an innovative response to solve the issue, investors are saying.
The Indonesian Association of Planners' (IAP) secretary-general, Bernardus Djonoputro, said unclear regulations, a lack of project preparation and difficulties in acquiring land had always been and were still the major problems that remained unsolved, thereby hindering private sector firms, be they foreign or local, from significantly contributing to infrastructure development in Indonesia.
"All global players are interested in entering the infrastructure industry in Indonesia but, at the same time, we are competing against other emerging markets. The financing is available, but it will only enter markets that are able to provide assurances and security," Bernardus said during a press conference on the sidelines of the Infrastructure Leaders Forum (ILF) seminar in Jakarta on Thursday.
Based on data from the National Planning Agency (Bappenas), Indonesia needs at least US$140 billion to finance infrastructure development over the next five years. The government, however, can only afford to fund around 35 percent of the needed infrastructure financing. The rest of the financing is expected to come from private investors under public private partnership (PPP) schemes.
There are 79 PPP projects worth $53 billion that have been offered to the private sector, out of which only one project in Central Java has completed its tender phase since the start of this year. The remaining projects have stalled in their early stages.
Poor infrastructure is creating high costs for the economy and logistical bottlenecks are expected to worsen following industrial expansion in Java. Indonesia's land transportation costs are far higher than those in neighboring Malaysia, Thailand and Vietnam, according to the World Bank.
Deputy head of infrastructure and regional development at the Office of the Coordinating Economic Minister, Wahyu Utomo, said the government had conducted several rounds of analysis seeking innovative measures.
"To support infrastructure development, we are considering developing a new institution, which has yet to be named. This institution will be responsible for preparing project proposals that are sufficiently viable to be offered to private investors," Wahyu said.
He added that, alternately, the government was considering issuing infrastructure bonds to obtain financing to enhance project preparations. "These bonds would focus on infrastructure projects as stipulated in the Master Plan for the Acceleration and Expansion of Indonesian Economic Development [MP3EI]," he said.
The MP3EI is a government blueprint that is expected to trigger growth in Indonesia and, in the long run, make the country one of the top-five global economies by 2025. It focuses on infrastructure development in six corridors – Java, Kalimantan, Sulawesi, Sumatra, Bali-Nusa Tenggara and Papua-Maluku – across the archipelago.
Development of the corridors is expected to garner at least Rp 4,000 trillion ($468.5 billion) in investment for various projects within a 15-year period, beginning in 2011.