'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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