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