$64b needed for infrastructure projects

$64b needed for infrastructure projects

JAKARTA (JP): Indonesia needs at least US$64 billion in new
investment in the next five years to develop its infrastructure,
according to Peregrine Investments Holdings Limited.

The international investment bank's estimate is far higher
than the $52 billion projected by the government in its current
five-year development plan.

Peregrine's chairman, Philip L. Tose, said yesterday that of
the total investments, around $25 billion will be needed for the
development of new power plants, $7 billion for
telecommunications facilities, $3 billion for air and sea
transportation, $8 billion for new toll roads and another $13
billion for other roads.

"Indonesia, like any other nation undergoing rapid changes
cannot go it alone," he told the Indonesia Summit.

Foreign participation in the infrastructure projects is needed
because the domestic market alone cannot supply such massive
investments, he said.

"When it comes to infrastructure development, or indeed to the
needs of highly capital-intensive industries with long pay-back
periods, financing structures become more complex," he said.

At the business forum, which ends today, Tose said that public
listing is a key part of the process in raising investment funds
but other financing alternatives, such as foreign direct
investments and fixed income or bond markets, are also essential.

"Properly balanced, the triumvirate of listed equity, foreign
direct investment and fixed incomes can provide essential fuel
for Indonesia's future," he said.

Tose said that a series of deregulatory measures introduced by
the Indonesian government in the past five years have encouraged
both domestic and foreign investment.

He said, however, that the process of deregulation,
particularly when it goes hand-in-hand with privatization, should
not be simply removing old structures, and then stepping back.

"In their place there often needs to be new simpler structures
and clear, efficient regulatory structures," he said.

For example, Tose said, at the moment, the framework for
approval of toll road rates is quite complex.

Without a simplified regulatory structure, new operators may
be reluctant to enter, given the fact that there is a global
capital shortage for the infrastructure development in the world.

Tose also called on the government to issue substantial
incentives to encourage more local investors to take part in
capital market activities, which are almost universally dominated
by foreign investors.

"One way is to offer advantages to local investors, such as
bonuses for holding their shares for long terms, and initially
offering price discounts for retail investors," he said. "Also,
the pricing of new issues should not be too aggressive."

Peregrine has operated in a number of key areas of financing
in Indonesia, from equity underwriting and project financing to
the issuance of debt instruments.

The bank has established Peregrine Indonesia Fund with $83
million in funds, the largest available for private equity and
venture capital in Indonesia. Out of the funds, 60 percent is now
invested in 10 manufacturing and service companies.(hen)