Govt prepares incentives for infrastructure investors
Rendi A. Witular, The Jakarta Post, Jakarta
The government will soon issue a number of regulations that will provide incentives and legal certainty for investors in the infrastructure sector, according to senior officials.
The proposed regulations cover, among others, incentives to lure billions of dollars of investment into toll roads, water sanitation facilities and seaports.
The central bank, meanwhile, plans to relax certain rulings to boost the role of the local banking industry in financing infrastructure projects.
Minister for Public Works Djoko Kirmanto said his ministry had prepared a number of government regulations which would provide legal protection and incentives for toll road investors. The regulations were expected to be issued this week.
"The regulations are expected to protect the operation and interests of (toll road) investors. We will try to accommodate their demands in a bid to facilitate the construction of the projects," said Djoko after the opening of a two-day Infrastructure Summit on Monday.
Djoko said the planned regulations would allow investors to negotiate toll rates and concession periods with the government.
"Unlike in the past, in which toll rates were solely decided by the government, now investors can negotiate (with the government), which is an important condition for investors in calculating the feasibility of projects," said Joko.
With the new regulation, investors can also automatically raise toll rates every two years without having to renegotiate the process with the government, he added.
Additionally, the government will also issue a regulation that will help investors in acquiring land for toll road projects, including the avoidance of lengthy negotiation periods and disputes with land owners over land price.
The regulation will also require local administrations to protect land allocated for toll roads by maintaining the land price in the areas, in order to prevent brokers from inflating prices.
Separately, Minister for Transportation Hatta Radjasa pledged to protect the interests of seaport investors from possible disputes with local administrations over the management of certain ports run by state-owned port operator PT Pelindo.
At present, there are some 150 ports under the management of PT Pelindo, and 400 ports run by the Ministry of Transportation.
"The government plans to settle all disputes over the management of ports with local administrations as soon as possible. We want to show to investors that we are committed to ensure legal certainty," said Hatta.
Currently, a number of local administrations, empowered by the autonomy law, are in dispute with the central government over who has the authority to manage local ports, despite existing laws that clearly stipulate that the authority lies in the hands of the central government.
Meanwhile, central bank governor Burhanuddin Abdullah said Bank Indonesia would issue a package of new banking regulations aimed at boosting bank financing for infrastructure development.
The regulations will include an increase in the legal lending limit requirement from the current 20 percent to 30 percent, an increase still deemed in line with international banking practice.
The central bank would also push smaller banks to merge by increasing the minimum capital adequacy ratio, a move that is aimed to boost the capacity of banks to carry out their lending role.
"Last year, the central bank decided to let the consolidation process of banks occur based on market forces, but it turned out to be ineffective. This year, we will issue a regulation obliging them to merge," said Burhanuddin.
The central bank is expected to issue a list of "anchor banks", which are tasked with consolidating with smaller banks. Burhanuddin refused to disclose the name of the banks, but it was fairly certain that the five largest banks by assets would be included in the policy.
"With the new package, we expect local banks to have a greater ability to finance the planned infrastructure projects," said Burhanuddin.