'Infrastructure needs private investment'

'Infrastructure needs private investment'

JAKARTA (JP): State Minister for National Development Planning
Ginandjar Kartasasmita yesterday restated the importance of
private sector involvement in the development of Indonesia's
infrastructure.

Ginandjar told a World Bank-sponsored international conference
on infrastructure that without the involvement of the private
sector, the government would certainly fail to sustain the
country's economic growth.

He said a substantial part of the investment for large
infrastructure projects should come from private companies
because the government's budget is limited.

He said the development of infrastructure in most Asian
countries, including Indonesia, had not proceeded as well as
expected because of financial problems.

Ginandjar said the World Bank has projected that Asia will
need around US$1.5 trillion for infrastructure development
between 1995 and 2004. Indonesia alone will need at least $190
billion.

The expected rapid growth of the country's gross domestic
product will also result in the rapid growth of infrastructure,
he said.

Ginandjar, who is also the chairman of the National
Development Planning Board (Bappenas), said there were still some
weaknesses in privatizing infrastructure projects, especially
those related to water and sanitation.

In other sectors, such as toll roads, power generation and
telecommunications, the partnership with the private sector was
most encouraging, he said.

"For example, for toll roads we began cooperating with the
private sector as early as 1990," he said. "Since then we have
completed nine toll roads with private participation, and 17 are
at an investment stage."

Ginandjar cited several key issues relating to private
participation in infrastructure development: Detailed policies
and strategies, the allocation of risks among parties, mutually
acceptable tariff-setting mechanisms and access to finance.

Russell Cheetham, the vice president of the World Bank for the
East Asia and Pacific Region, said that high expectations for
private involvement in Asian countries had been followed by
disappointment.

"The needs are great but the initial momentum has stalled.
There have been many memoranda of understanding but few agreed
projects" he said in his address at the conference.

He said the private sector, which is expected to play a major
role in infrastructure development, is financing and
participating in less than 10 percent of the total infrastructure
investment in the region.

"By one estimate, the total size of project financing
accomplished in East Asia was $5 billion in 1995, of which $3
billion went to just two projects, Paiton in Indonesia and Sual
in the Philippines," he said.

He said there was a lot of interest in power generation
projects but little interest in transmission or distribution.
"Toll roads have experienced a setback. The private involvement
has been limited and largely opportunistic on water despite major
needs," he said.

He said it was time to develop an overall framework for
private involvement that reduced the private sector's perceived
risks, lowered the cost of doing business and met social goals of
fair and efficient pricing, humane management of resettlements
and protection of the environment.

"The ingredient of such a framework will depend on country
conditions. But it is likely that measures to reduce risks,
promote competition and transparency and avoid excessive
guarantees by governments will be common elements," he told the
three-day seminar, which was opened by President Soeharto on
Monday evening.

Speakers at the conference on the public-private interface of
East Asia's infrastructure development also included senior
officials from Malaysia and the Philippines and several experts
from Australia, Japan, South Korea and Chile. (hen/rid)

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