Govt red tape retards infrastructure investment

Govt red tape retards infrastructure investment

Rendi A. Witular, The Jakarta Post, Jakarta

Last month's much-hyped Infrastructure Summit has apparently not
been able to spur government bureaucrats into action,
particularly on the issue of promised regulations to streamline
the process for foreign investors.

Prior to the summit -- in which 91 infrastructure projects
worth US$22.5 billion over the next five years were offered to
domestic and international investors at the Jan. 17 and Jan. 18
event -- the government has prepared 11 government regulations
and three presidential decrees as the legal basis for those
projects, but those will take several months to implement.

"We (the government) can't issue the regulations any time soon
because our workload in the first three months has been too much.
It has been very difficult to issue new regulations," State
Minister of National Development Planning Sri Mulyani Indrawati
said on Thursday.

The main obstacle for the planned issuance of the regulations,
she said, was that the many of the drafts could contain articles
that are in conflict with other laws. That would mean even more
time as the government would have to revise the laws to be
consistent with the new regulations.

"We must maintain legal consistency between existing laws and
new regulations. We must also take into account the impact of our
long-term development programs. We must meticulously arrange the
regulations to avoid legal uncertainty in the future," Mulyani
explained.

Sri would not venture a guess as to when the reform-oriented
regulations would be issued.

Legal uncertainty is one of the main concerns for foreign
investors, in addition to the out-of-control corruption here.
They have expressed fear that legal uncertainty would result in
legal disputes, either with local partners or with the
government.

Investors have also proposed the possibility of obtaining
legal protection and guarantees directly from the central
government in developing infrastructure projects.

Meanwhile, a source at the Office of the Coordinating Minister
of the Economy said the government might "take months" before
completing the new regulations since it has to revise a number of
laws with the House of Representatives before they are endorsed.

"It is such a mess. It will take months before the regulations
on the incentives can be implemented," said the source.

The government is in dire need of a whopping $150 billion in
new investment for the development of roads, power plants and
other crucial infrastructure facilities over the next five years.

Some 55 percent of the funds, or around $80 billion, is
expected to come from outside Indonesia in the form of foreign
direct investment or loans from donor countries and agencies,
while the rest will be from domestic resources.

Among the regulations promised to investors is their ability
to negotiate toll rates and concession periods with the
government in order to enable investors to calculate the cost
feasibility of projects.

Another promised regulation is on the government's assistance
to the investors in acquiring land for toll road projects,
including the avoidance of lengthy negotiation periods and
disputes with local land owners over the compensation price.

Another proposed regulation will require local administrations
to protect land allocated for toll roads by maintaining the land
price in the areas, in order to prevent unscrupulous brokers from
increasing prices.