Investor doubt grows with each protest

Investor doubt grows with each protest

Rendi A. Witular, The Jakarta Post, Jakarta

Recent disturbances in the construction of a toll road here
highlight investor uncertainty, which has been exacerbated by the
government's failure to keep its promise to issue the much-
awaited regulation on land acquisition this month.

The uncertainty is further quelling investor interest in the
sector, at a time when the country is in dire need of investment
in infrastructure, in order to support higher economic growth and
reduce unemployment.

Just last week, residents of Pasar Kecapi and Jatiwarna
subdistricts in Bekasi, burned tires and damaged parts of the
Hamkam Raya-Jatiasih section of the Jakarta Outer Ring Road
(JORR) project, which had already been completed.

The minority of landowners demanded state toll operator PT
Jasa Marga -- the developer of the project -- pay them Rp 1.1.
million (US$107) per square meter of land used for the road.

However, the company is only willing to pay Rp 300,000 per sq
m based on the taxable value of property (NJOP) in the area --
the exact amount that most of their fellow landowners received.

The protest forced roadwork to a halt, causing Jasa Marga to
suffer huge losses. The remainder of the JORR project, with a
total length of some 30 kilometers, is estimated to cost $223.7
million.

"The government cannot prevent such a problem from reoccurring
in the future, unless the proposed regulation on land acquisition
has been approved by the President," Minister of Public Works
Djoko Kirmanto told The Jakarta Post recently, referring to the
land acquisition proposal his ministry submitted to the President
for approval.

Djoko acknowledged there had been a delay in the issuance of
the regulation due to legal problems, and that he could no longer
be certain of the exact date of its issuance as the drafting of
the regulation involved other institutions.

"The aim of the regulation is to provide investors with
guidelines for acquiring land for toll road projects, including
the avoidance of lengthy negotiations and disputes with land
owners over land prices," he said.

The regulation was supposed to be issued right after the
Infrastructure Summit in January, and is designed to encourage
foreign investors to take part in a number of state
infrastructure projects.

During the summit, the government pledged to provide
incentives and lay down regulations to improve conditions for
investors. However, most of its promises remain promises so far,
mostly due to legal problems.

"Drafting a regulation is not easy. But the government has
shown success in completing some five or ten regulations that
were pledged during the summit," said State Minister of National
Development Planning Sri Mulyani recently.

Mulyani said foreign investors would be protected as the
government would immediately complete all of the necessary
regulations in order for them to operate safely and finish
projects on schedule.

The failure to issue the regulations expediently could cause
land acquisition problems in other areas.

The construction of the JORR's Veteran-Ulujami section is one
project prone to disturbances by landowners.

Although Jasa Marga managed to settle a land acquisition
dispute and continue with the project, it may encounter further
obstacles due to red tape at the Ministry of Public Works.

The landowners, who had several times clashed with
construction workers disrupting roadwork are yet to receive the
compensation that was promised to them by the ministry.

The project was originally set for completion by May 2003.

Key points in the proposed land acquisition regulation

1. Local administrations are required to protect land allocated
for toll roads by maintaining the land price in the areas, in
order to prevent brokers from inflating prices.

2. The government will eliminate the rights of minority
landowners to protect land ownership, unless an agreement is made
on the compensation awarded by the government for the land.

3. Land disputes will be resolved in courts, without halting the
ongoing construction project.

4. The government, via a special agency, will entirely handle
land clearance for toll road projects, as well as bailing out
clearance costs, with the investors repaying land acquisition
costs later.

5. All future land disputes, which arise after the toll road is
in operation, will be entirely settled by the government.

Source: The Jakarta Post files