Jan.17, 2005<\/p>\n
Infrastructure action plan<\/p>\n
The government has made the right decision in going ahead with
\nthe Infrastructure Summit, which starts today, despite some
\nstrong suggestions that it be postponed because of the situation
\nin Nanggroe Aceh Darussalam and North Sumatra.<\/p>\n
The investment forum is even more relevant now after the
\nearthquake and tsunami destroyed basic infrastructure across
\nseveral coastal towns in northern Sumatra. Yet, more encouraging
\nis the high enthusiasm of the more than 310 foreign investors in
\ntheir intent to attend the two-day summit.<\/p>\n
Even before the cataclysm in northern Sumatra, infrastructure
\nsuch as roads and port facilities in most provinces had
\ndeteriorated due to a severe lack of maintenance funds, while the
\nprospect of imminent power shortages faces many provinces on
\nJava, Sumatra, Sulawesi and Kalimantan. In fact, several outer
\nislands have already been suffering regular outages.<\/p>\n
It is no wonder that infrastructure deficit is one of the
\ngreatest obstacles to investing in Indonesia. Poor infrastructure
\nimpairs the economy's competitiveness, as it causes production
\nand distribution costs to rise higher than those of other
\ncountries. Inadequate infrastructure, such as poor roads, also
\nhinders access to public services such as health, education and
\nmarket facilities, thereby hampering poverty alleviation.<\/p>\n
The Infrastructure Summit is also more timely now because the
\ngovernment's investment capacity has been curtailed by severe
\nfiscal constraints after the 1997 economic crisis, and new
\ninfrastructure development has had to rely mainly on private
\ninvestment. Before the crisis, the government was responsible for
\nover 80 percent of investments in infrastructure development, but
\nnow it cannot even afford to meet the maintenance costs of
\nexisting infrastructure, let alone build new infrastructure.<\/p>\n
Infrastructure development needs to be accelerated to generate
\nan annual growth of at least 6 percent -- the minimum economic
\nexpansion needed to absorb the millions of unemployed and
\nunderemployed in the country.<\/p>\n
Analysts agree that developing countries require a minimum of
\nas much as 7 percent of gross domestic product (GDP) in
\nmaintenance funds and new investment for infrastructure
\ndevelopment to generate a 6 percent economic growth. However,
\ninfrastructure investment in the country has been hovering at
\nonly around 2 percent GDP since 1998.<\/p>\n
The Infrastructure Summit seems to have been designed to be a
\ntruly effective investors forum, with the government having
\nprepared 91 key infrastructure projects worth US$22 billion to be
\noffered at the forum. This is only part of the estimated $75
\nbillion necessary for infrastructure development over the next
\nfive years.<\/p>\n
Each of the projects on offer, such as toll roads, power
\nplants, gas pipelines, ports, airports and telecommunications
\ninfrastructure, comes with a basic profile sheet to help
\npotential investors identify those projects in which they are
\ninterested.<\/p>\n
Meanwhile, the government has been addressing most of the
\nmajor problems that have been hindering private infrastructure
\ninvestment. It will soon enact 14 government regulations to
\nstrengthen legal certainty, solve taxation issues, improve the
\ncommercial viability of infrastructure investment, expedite land
\nacquisition and set up a viable tariff\/pricing system.<\/p>\n
Given the complex land acquisition problems many investors
\nencounter, the government should also require that provincial
\ngovernors participate in the summit. These local leaders have an
\nimportant role in facilitating the smooth implementation of
\ninfrastructure projects, most of which require a lot of land and
\noften extend to remote areas.<\/p>\n
The experiences of other countries that have succeeded in
\nwooing private infrastructure investment show that effective
\nregulations are key to creating a condition conducive to
\ninfrastructure development.<\/p>\n
Regulatory framework must be credible in that they have been
\ndesigned to protect the interests of both investors and
\ncustomers, while regulatory processes must be open and
\ntransparent, and encourage competition. Furthermore, although
\nregulations on pricing should provide incentives to investors,
\nthey should also provide well-designed subsidies and safety nets
\nto ensure that the poor have access to vital services.<\/p>\n
Given the enormous economic importance of infrastructure
\ndevelopment, the huge infrastructure deficit and the huge need
\nfor private financing to cover the deficit, the Infrastructure
\nSummit could turn out to be one of the most important measures in
\nthe First 100 Days Agenda of the Susilo administration.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/jan17-2005-1447899208",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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