Infrastructure investors remain skeptical
Rendi A. Witular, The Jakarta Post, Jakarta
The many promises and projects offered by the government during last week's Infrastructure Summit apparently were not enough to ease the fears of cautious investors, who still want to see the promises translated into real action amid the country's weak bureaucracy and rampant corruption.
"The summit is just the beginning for the government to show that they can raise investors' confidence. But such confidence cannot only be ensured by words," said Robert Rankin, managing director of UBS Investment Group Asia.
"The government should set up two or three infrastructure pilot projects, in which the process is ensured to be free from irregularities. Investors won't come back if they see the pilot projects are tainted with abuse," he added.
The government faces a daunting task in fulfilling its promises made during the summit, given the fact that most key state officials nationwide seem to be afflicted with a corruption mindset and that the bureaucratic system they work in is poorly coordinated or controlled.
Moreover, it remains unclear as to how the government plans to ensure that the bidding process for each project is conducted fairly and transparently, especially when dealing with companies with close, but informal, links to state officials.
State Minister of National Development Planning/National Development Planning Board chairwoman Sri Mulyani Indrawati said all companies, including those with links to state officials and politicians, could win the projects as long as they managed to meet the requirements.
She said the tender process would be carried out based on the existing regulations, but with enhanced transparency.
The government will need around US$150 billion for the development of various infrastructure facilities. Some $25 billion 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.
In the investment forum, the government offered 91 infrastructure projects worth $22.5 billion to foreign and domestic investors.
Another reform commitment promised by the government during the summit was the finalization of all required policies to improve the investment climate as well as the revision of problematic regulations within six months. It also pledged to honor all contracts made with private companies or individuals.
The government also signed a declaration with representatives of companies from 22 participating countries in the summit, designed to underscore the government's commitment to removing the many bureaucratic hurdles to private sector investment.
However, a number of would-be investors at the summit, who preferred not to be named, were pessimistic that the government could come up with concrete changes within six months.
"How can we trust this government if it has already failed to convince the business community of its seriousness in combating corruption within President Susilo Bambang Yudhoyono's first 100 days?" a foreign investor wondered aloud.
He said his existing operation in Indonesia was still having a lot of problems with widespread illegal fees collected by officials from local administrations, the central government, the police and the military. And, he added, there had been no sign that the problems would end.
If such corruption remained, he said, what would happen to private companies involved in these infrastructure projects, since most would require 10 to 15 years to reach the break-even point.
Investment projection for 2005-2009
Infrastructure Projects Investment
Roads 114,800 kilometers Rp 214.2 trillion
Energy 25,700 Megawatts Rp 287.8 trillion
Fixed line telephones 12.9 million users Rp 88.8 trillion
Cellular phones 24.3 million users Rp 62.7 trillion
Tap water 28.1 million consumers Rp 16.9 trillion
Sanitation 46.9 million households Rp 18.8 trillion
Total Rp 689.2 trillion