From The Jakarta Post

New policy package reaches out to investors

Urip Hudiono, The Jakarta Post, Jakarta

The government has prepared a package of 153 policy actions for this year to encourage private investment in the much-needed development of infrastructure to support higher economic growth.

Coordinating Minister for the Economy Boediono said Friday the policies would mainly consist of improving related regulations, simplifying licensing procedures and providing several facilities to better implement infrastructure projects, as well as support their financing needs.

The policies will concern 10 main infrastructure sectors: roads, railways, power, oil and gas, telecommunications, housing, water and sanitation, air, water and land transportation.

"This infrastructure policy package is part of the government's larger strategy to improve the investment climate, address investor concerns and attract as much private participation as possible in the development of infrastructure, which is needed for higher and more sustainable economic growth," Boediono said.

The package is particularly urgent, he added, because the condition of many of the country's roads, ports and power plants deteriorated after the 1997-1998 Asian financial crisis, hampering investment and growth.

The government is projecting 6.6 percent average growth between 2005-2009. The economy only grew 5.6 percent from a 6 percent target in 2005, with private consumption and investments slowing down amid last year's economic turmoil of high inflation and interest rates.

Indonesia needs as much as Rp 1.3 quadrillion (about US$139 billion) between 2005-2009 to improve its infrastructure, of which the government can only cover 20 percent and hopes the rest will be sourced from private investors.

The government undertook a similar package of 50 policy actions last year to attract infrastructure investments, including issuing a presidential regulation on land acquisition for public use.

Acknowledging that the regulation had yet to be effective, Boediono mentioned its revision as part of the policy actions to improve 33 related regulations, the administrative and permit process, as well as five regional laws.

The government will also establish a risk management unit under the finance minister, and a public-private partnership center under the National Development Planning Agency (Bappenas).

Finance Minister Sri Mulyani Indrawati expects the unit to prepare various risk-coverage schemes for infrastructure investment projects by June.

The center, meanwhile, will assist ministries in drafting related policies, preparing project bids, contracts and transactions, as well as in their monitoring.

"The center will study various partnership models to prevent the repeat of past experience, where the government had to pay penalties due to projects failing to be realized," Boediono said.

"What we want are public-private partnerships that are fair to both parties. The most important aspect now is to reduce financing costs, for example, how to lower interest rates, by working together with the central bank in containing inflation."
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