Govt rolls out red carpet for investors

Govt rolls out red carpet for investors

Fabiola Desy Unidjaja and Zakki P. Hakim, The Jakarta Post, Jakarta

President Susilo Bambang Yudhoyono promised foreign investors on
Monday a much better investment climate as the government aims to
lure a whopping US$120 billion in new investment for the
development of roads, power plants and other crucial
infrastructure facilities over the next five years.

He said the government planned a "new partnership" that would
help ensure legal certainty for investors and aimed to eliminate
distortions to investment and economic activities through
improved tax and fiscal policies, an efficient and effective
administration and higher economic competitiveness.

"We'll eliminate obstructions that have impeded investment and
economic activities," Susilo said at the opening of the two-day
Infrastructure Summit, which nearly 600 domestic and foreign
investors attended.

He explained that the lack of infrastructure in the country --
as a result of years of neglect since the 1997 regional economic
crisis -- had led to, among other things, long traffic jams,
power outages and bottlenecks at seaports, all of which hampered
economic activities and increased the cost of doing business
here.

The government has said it would need around $145 billion for
the development of various infrastructure facilities on top of $4
billion for infrastructure in tsunami-ravaged Aceh.

Some $25 billion, or 17 percent of the funding needed, is
expected to come from the state budget; $30 billion from domestic
finance institutions; $10 billion from foreign donors; and the
$80 billion bulk from private and foreign investors.

During the investment forum, the government offered 91
infrastructure projects worth $22.5 billion to foreign and
domestic investors. The government will start the bidding process
in February.

Coordinating Minister for the Economy Aburizal Bakrie said the
next batch of infrastructure projects worth $57.5 billion would
be offered in November.

He previously said that investment in the infrastructure
sector would generate a healthy investment return of between 15
and 23 percent.

Fixing the infrastructure sector is crucial to help the
country enjoy higher economic growth of at least 6 percent per
year, the minimum growth level needed to help resolve the chronic
unemployment problem. The largest Southeast Asian economy has
been growing at an average of around 4 percent over past years as
investors have been reluctant to pour in new money due to a
variety of reasons, including legal uncertainty, security
concerns, corruption and the threat of terrorism.

Susilo said the country's failure to rebound from the 1997
financial crisis was partly due to its poor infrastructure, which
discouraged badly needed new investment.

Some 45 percent of households in Indonesia have no
electricity. The country also has the lowest telephone access
rate in the Asian region, with only four out of 100 Indonesians
having ready access to telephones.

Meanwhile, Dutch water company Waterleidingmaatschappij
Drenthe director KJ Hoogsteen told The Jakarta Post that the
government's presentation was quite promising, although he would
need to see how the policies promised would be implemented.

"I'm looking forward to seeing how will it fix the legal
framework in the water supply sector, as many of the regulations
contradict each other," he said on the sidelines of the summit.

Foreign players in the water supply sector have complained of
legal uncertainty as bylaws issued by local administrations often
contradict central government rulings.