Big investors keen for share in public works
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).