European investors see promising opportunities in the infrastructure sector here, but say that lack of legal certainty remains a major problem.
"We have a lot of companies that have expressed their commitment and interest, but they are waiting for the laws (to be reformed)," European Business Chamber of Commerce in Indonesia (EuroCham) deputy chairman Michael Olsson told The Jakarta Post on the sidelines of the signing of a cooperation agreement Thursday with the Indonesian Chamber of Commerce and Industry (Kadin).
"New companies that want to come here are a little bit afraid because there is a lot of laws being mangled in the parliament," he added.
In the agreement, the two business chambers stated their commitment to fostering cooperation in developing infrastructure projects in Indonesia.
Under the agreement, the chambers also agreed on the need to establish a special forum through which Indonesian and EU companies could access the latest information on the regulatory reform process and decisions pertaining to the infrastructure projects on offer.
The forum, to be financed by the European Commission, will also provide training workshops on business opportunities in Indonesia.
The European companies are interested in taking part in infrastructure projects in the telecommunications, water treatment, transportation and power generation sectors.
"Europe is very keen on telecommunications," Olsson said, adding they were also ready to compete with China in tendering for power-plant projects in Indonesia.
During last year's infrastructure exhibition, the government offered 10 infrastructure projects involving the construction of new power plants, expressways, seaports, municipal water systems and telecommunications facilities worth an estimated US$4.5 billion.
The projects, which are supposed to serve as models for high-quality international business cooperation, include the constructions of the "Palapa Ring" fiber-optic network, a 1,200 megawatt coal-fired power plant in Central Java, a 500 MW coal-and-oil-fired power plant in Pasuruan, East Java, and two water projects in Bandung, West Java, and Dumai, East Kalimantan.
Coordinating Minister for the Economy Budiono said he strongly supported the initiative by EuroCham and Kadin, adding that the government would continue to increase private sector participation in infrastructure provision.
"We want the private sector, as well as SOEs, to be the main drivers of infrastructure projects in the future," he said during the signing of the agreement
The government had annulled 18 regulations deemed to be out of line with the Infrastructure Policy Package as part of the effort to reform the legal framework, he said, adding that the package, which consists of 156 regulations, is aimed at enhancing infrastructure development in Indonesia.
Kadin chairman M.S. Hidayat said a number of representatives of major European companies would visit Indonesia in April to take a closer look at the infrastructure potential here.
He said that the forum to be established by Kadin and EuroCham would closely monitor the progress of the government's legal reform program.
"With this forum, we have a channel to talk to the private sector. We've been working with the government all the time and we always try to talk with the legislature. Now, besides talking to them, we would also like to talk to the industry," Olsson explained.