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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.".
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