Guarantee facilities to be provided for investors
Guarantee facilities to be provided for investors
Rendi A. Witular, The Jakarta Post, Jakarta
The government is mulling the provision of guarantee facilities
to help mitigate the risks for investors in developing the
country's infrastructure, in particular the power and toll road
sectors -- a move aimed at reducing uncertainty.
Minister of Finance Yusuf Anwar said on Monday the government
would work with the World Bank and the Asian Development Bank
(ADB) to explore specific guarantee instruments in selected
projects offered at the Indonesian Infrastructure Summit.
"We are going all out to restore investor confidence for
infrastructure development. We will establish a framework for
risk mitigation and sharing to attract investment," said Yusuf
during the summit on Monday.
The government would, at least for now, outline its policy
regarding risk sharing in two key infrastructure facilities;
power and toll roads.
In the power sector, such a guarantee will cover the
construction completion risks, in which the government will cover
any costs resulting from a delay because of a mix-up on the part
of the government. The guarantee would be in the form of
contractual provisions and/or other commercial instruments.
Risks associated with power supply would be mitigated through
technical assistance contracts and commercial insurance coverage.
The government will also be exploring options to cover risks
associated with a rise in fuel costs. However, it will only
examine the risks on a case by case basis.
Concerning political, regulatory and currency risks, the
government will consider bearing those costs, except in the case
of force majeure.
Regarding efforts in mitigating the risks for toll road
investment, ways are being considered to help resolve land
acquisition problems -- which have long been a sensitive issue --
including setting up a fund-gathering mechanism in which the
government may acquire the land for toll road projects using such
funds.
Under this scheme, the company will repay to the government
the cost of the land, once it is awarded a contract to develop a
toll road project -- in some cases, the government will allow the
company to repay it over an extended period.
In terms of land price, the government is also mulling options
to cover such a risk, in which it will guarantee the agreed price
for the land. If the eventual price is higher than the agreed
one, then the government will cover the price difference.
Other risk-mitigation efforts is the possibility the
government will undertake specific action under special
circumstances, where land conflicts involve the development of
crucial public works.
Elsewhere, Yusuf also said the World Bank and the ADB would
likely agree to provide about 10 percent of the financing needs
for the country's massive infrastructure projects, which is
estimated to be about US$150 billion; primarily on projects
related to water sanitation.
Yusuf added that the two agencies might provide softer terms
and conditions for project loans other than infrastructure.