Govt prepares incentives for infrastructure investors

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.