Big investors keen for share in public works

Zakki P. Hakim, The Jakarta Post, Jakarta

It seems that confidence in investment climate in Indonesia may have started to improve, with hundreds of potential investors, foreign and domestic, having expressed enthusiasm to participate in next month's infrastructure summit.

Enthusiasm was so high that participants would be limited to 500 invited investors, according to the Indonesian Chamber of Commerce and Industry (Kadin), as the government's partner in organizing the event.

The potential investors -- that include giant multinational names such as General Electric, Siemens, Paiton Energy, Sumitomo Corp., Alcatel and Motorola -- are apparently confident about the government's seriousness in undertaking massive infrastructure projects over the next five years.

It was not the only reason, however.

According to a senior economic minister, the investors do indeed have the confidence in the government, but more importantly, they also see the lucrative returns the projects could offer.

"These projects will give a rate of return of between 15 percent and 23 percent on average," Coordinating Minister for the Economy Aburizal Bakrie said in a meeting with the media on Wednesday.

The figure was a rough estimate based upon surveys conducted by Kadin, the government and the World Bank, which would also co- sponsor the event, on the assumption that the largest economy in Southeast Asia would have an average annual growth of 6.5 percent over the next five years.

The government expects the economy to grow by 5 percent this year, higher than the 4.8 percent target, having grown by 4.1 percent last year.

It has been reported earlier that Indonesia would need up to US$74 billion over the next five-year period for various infrastructure projects, with the upcoming summit focusing on sectors such as power and energy, tollroads, transportation, water and sanitation, ports and airports, and telecommunications.

Of the total, however, state coffers would only contribute about 20 percent, meaning that private participation would hold the key to the success of the ambitious plans.

Aburizal said that foreign investors were expected to cover up to $45 billion for infrastructure, while domestic banks and financial institutions might contribute around $22 billion.

Among the local banks, publicly listed lenders Bank Mandiri and Bank Negara Indonesia (BNI) had committed to participating in providing lending for the massive projects.

BNI, for instance, plans to allocate Rp 23 trillion ($2.5 billion) in loans for infrastructure projects over the next five years. For 2005 alone, the bank may issue up to $300 million in bonds as part of its financing source, BNI president Sigit Pramono told reporters.

Separately, Kadin chairman MS Hidayat said the private sector would also push the government to fix investment-related rulings before the summit, scheduled for Jan. 17-18 at the Shangri-La Hotel.

"The government has to fix the regulations as soon as possible, so when investors come and ask questions on procedures, we have proper answers for them," Hidayat said.

Moreover, to nurture the growing confidence the government will sign a joint declaration at the end of the summit showing its determination in pushing infrastructure projects.

Among the proposed speakers at the summit are ambassadors from neighboring countries, top executives from international corporate players, global funding institutions such as the World Bank, the Asian Bank Development, and the Japan Business International Cooperation (JBIC).