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.