Government to offer investment opportunities at summit

Government to offer investment opportunities at summit

Rendi A. Witular, The Jakarta Post, Jakarta

The government will offer 37 key infrastructure projects worth
more than Rp 100 trillion (US$10.87 billion) to local and foreign
investors in next week's Infrastructure Summit, in a bid to help
speed up economic growth and reduce unemployment.

Raden Pardede, head for the government's special team for
infrastructure, said the projects, all to start this year, would
focus mostly on the construction of toll roads, power plants and
gas pipelines for both transmission and distribution.

"We will propose 37 projects during the infrastructure summit
next week. The projects will have a high value of profitability
and will become pilot ventures for the government's planned mass
infrastructure push," Raden told a press briefing on Tuesday.

These projects, spread across Indonesia, excluding areas
recently devastated by the tsunami and earthquake, are expected
to give a return of between 15 percent and 23 percent on average
to investors.

Of the total value of the projects, Raden added, some Rp 50
trillion would come from funds derived domestically -- Rp 25
trillion of which would be derived from local banks, Rp 5
trillion from the capital market and Rp 20 trillion from the
state budget.

The government will also try to lure foreign and local pension
funds and insurance firms, as well as big time local companies,
such as cigarette producers, to get involved in the projects.

President Susilo Bambang Yudhoyono has repeatedly pledged to
embark on a massive infrastructure construction program, to help
it achieve the targeted annual growth of 6 percent. Higher
economic growth is crucial if the government wants to reduce the
number of unemployed or underemployed -- currently more than 40
million people.

The government has said that it would need up to Rp 1.3
quadrillion (about $140 billion at current exchange rates) to
finance infrastructure-related projects for the next five years.
About Rp 556 trillion of which, will be provided from domestic
sources, while the remaining Rp 744 trillion would come from
foreign funds in the form of direct investment or loans from
donor countries and agencies.

Of the total however, the state budget will only contribute
about 20 percent, meaning that private participation is the key
to the success of the ambitious plan.

Elsewhere, Raden added that while the projects would focus on
gas pipelines, toll roads and power plants, some would also be
allocated for the development of seaports, airports, water
sanitation systems and telecommunications.

To help lure investors into the projects, the government will
soon issue 14 government regulations in a bid to eliminate
barriers that the business community currently has to contend
with to engage in projects here, he added.

One such obligation requires landowners to cooperate on land
acquisition and compensation processes, so that the projects
should proceed smoothly.

Numerous infrastructure projects in the country have run
aground due to land-related problems, with investors often facing
widespread protests and rejections from landowners due to unclear
regulations.

Other regulations will cover the ability of state enterprises
to engage in the infrastructure projects. This is designed to
raise capital by selling some part of its stake to the public via
initial public offerings or by spinning off some of their
subsidiaries, in a bid to increase debt limits to help raise
funds for the projects.