Thu, 02 Nov 2006
Jakarta (ANTARA News) - Indonesia's president urged foreign and domestic investors Wednesday to stump up funds to boost the nation's flagging infrastructure sector, arguing that new laws would assure profitability.

Some 111 projects worth 19.1 billion dollars are to be offered at the three-day summit opened by President Susilo Bambang Yudhoyono, including 10 "model" projects worth 4.5 billion dollars, according to a statement from the organisers.

The medley of projects on offer relate to toll roads, drinking water, electricity generation, gas distribution and piping, ports, airports, railways and telecommunications.

Growth in Southeast Asia's largest economy has been hindered by a lack of investment in infrastructure in recent years, leading to regular power blackouts, crumbling highways, an overburdened phone network and crowded ports.

"We estimate that over the next few years we will need at least 22 billion dollars per year to build infrastructure in the energy sector, roads, ports, harbours, housing and water sanitation" and so on, Yudhoyono said.

"The government will provide only part of this funding, while the major portion will have to come from the private sector."

Jakarta held its first infrastructure summit early last year, soliciting bids for 91 projects worth 22.5 billion dollars. Only nine deals however have since been secured.

Since then, Yudhoyono noted, he had issued a decree "which outlined a more robust legal and regulatory framework for public-private partnership, with strong emphasis on transparency, fairness, a level playing field and mutual benefit."

"We know full well that a prime consideration for the private sector to invest is profitability," he was quoted by AFP as saying.

"This regulation reflects our commitment to offer projects that adhere to international best practices and good governance."

The standard of Indonesia's infrastructure has plunged in recent years.

A government report this year showed Indonesia in 1996 outranked Thailand, Taiwan, China and Sri Lanka in terms of infrastructure quality but the region's former economic power now ranks close to bottom for most indicators.

Two percent of GDP

"Our infrastructure problem is quite simple: there has not been enough of it," Yudhoyono said.

"During the crisis years, we simply stopped putting money into building infrastructure, a trend which we must now reverse," he added, referring to the 1997-98 Asian financial crisis.

An Asian Development Bank report this year showed that Indonesia's infrastructure investment accounted for six percent of gross domestic product before 1997, but now sits at just two percent.

Vice president of the Asian Development Bank Lawrence Greenwood told investors that Indonesia's challenge was to create an environment that assured them of "predictability, a level playing field, low transaction costs and fair rates of return."

This would require reforms to permit increased competition, independent regulatory oversight, clear rules and regulations for infrastructure project proposals, tariff regimes based on cost recovery and efficient dispute resolution mechanisms, he said.

"Given its commitment and progress to date, there is good reason to believe that Indonesia's climate for investment in infrastructure will continue to improve," he added.

Analysts warned ahead of the summit that enthusiasm for projects at the summit may be tempered by rampant corruption and bureaucratic red tape afflicting the nation. (*)



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