Tue, 19 Oct 2010

From: Reuters

By Aditya Suharmoko and Sunanda Creagh
JAKARTA Oct 18 (Reuters) - Indonesia plans to revamp its land law, which investors hope will speed up the acquisition of land to help build infrastructure ranging from roads to airports.

Inadequate infrastructure is seen as a deterrent to attracting foreign direct investment to Southeast Asia's biggest economy, and improvements would bolster long-term finances and improve the chances of an investment grade sovereign rating.

Reuters has obtained a copy of the government's draft bill, which is expected to be submitted to parliament before the end of this year.

Here are some questions and answers on it:


The new bill applies to a selection of infrastructure projects such as roads, railways, drainage systems, dams, ports, airports, train stations, bus terminals, and other projects deemed by the president to be in the public interest and listed in the government's official medium-term development plan.

If private land is required for a project, an appraisal committee will consult owners and determine what compensation should be paid. The committee will include representatives of local mayors or governors, as well as National Land Agency (BPN) bureaucrats.

Compensation can be in the form of cash, housing, landswaps or an equity stake in projects.

Significantly, the new bill sets timeframes. Cash compensation must be paid within 60 days, while other forms within an agreed time frame.

Landowners who object to compensation offers have 14 days to appeal to the High Court, which must issue a decision within 30 days. No further appeals are allowed and the government has the right to cancel titles if an appeal is dismissed.

Frans Sunito, chief of Indonesia's top toll road builder Jasa Marga, is upbeat for the bill's prospects.

"The current problem is that we do land acquisition by negotiating," he told Reuters.

"If the seller says no we can't build ... some acquisitions could even take years to complete," he said.


While there are several positive changes in this bill, more needs to be done to boost infrastructure in Indonesia and the new law will not help overcome institutional problems within the National Land Agency, which suffers from a legacy of graft.

Indonesia also struggles to attract sufficient financing for infrastructure. Finance Minister Agus Martowardojo recently admitted that the government can only provide 35 percent of the budget needed for infrastructure projects in the next five years.

It's unclear how much sway local representatives will have in the land acquisition committees -- if given sufficient power, regional leaders may quash locally unpopular projects.

Senior ministers hope the bill will be submitted to parliament by the end of the year, but even if this is achieved, the inefficiency of the parliament means it could be another six months to a year before it is passed -- parliament passed only seven bills in its first year of office.

Most major parties will likely support the bill, but developers will still need to wait another six months to a year for the release of implementing regulations needed to give details on how the law would work in practice, so it may be 2012 before coming into effect.