Govt touts 'win-win' approach at summit

Urip Hudiono, The Jakarta Post, Jakarta

"Partnership" has become the government's mantra in its efforts to lure investors into the much-needed development of Indonesia's infrastructure.

Raising the curtain Wednesday on the three-day Indonesia Infrastructure Conference and Exhibition, President Susilo Bambang Yudhoyono told private investors that the government is committed to cooperating with them to develop the country's infrastructure in a "win-win solution".

The government has been working on several regulatory and policy reforms over the past year to achieve that goal, including changes to the framework for public-private partnerships, and risk-sharing and guarantee schemes for infrastructure projects.

"Our infrastructure problem is quite simple: there has not been enough of it," the President said.

"During the crisis years, we simply stopped putting money into building infrastructure, a trend which we must now reverse."

Yudhoyono said Indonesia would need to pour US$22 billion each year into the effort. Improved infrastructure is expected to spur growth and ultimately reduce poverty and unemployment.

The government can only provide part of the money. The rest is expected to come from private investments, particularly in commercially-viable projects.

The recently issued presidential regulation reforming public-private partnerships emphasizes transparency, fairness, a level playing field and mutual benefit.

"We know full well that a top consideration for the private sector when investing is profitability," the President said.

"This regulation reflects our commitment to offer projects that adhere to international best practices and good governance."

Yudhoyono added that public-private partnerships had also been strengthened under a risk-sharing framework.

"We all know that infrastructure projects have a long-term payback period. So to provide you with greater security, the government is perfectly willing to enter into a reasonable degree of risk-sharing," he said.

The government's latest commitment to improving infrastructure investment through policy reforms may indicate that it is learning from the mistakes of last year's investment forum, which produced lackluster results.

Of the 91 projects worth US$22.5 billion offered then, only a handful with a total value of $6 billion were secured. Most of the projects had been hastily offered and the government had not laid out any concrete policies to improve the investment climate.

Some 101 projects worth US$19.1 billion in toll roads, power plants, seaports, water distribution systems and telecommunications will be on offer at this year's summit. They include 10 "model projects" worth US$4.5 billion that follow the new public-private partnership format.

This year's investment forum was rescheduled twice, from November of last year to February, and then finally to this month, due to the lack of supporting policy reforms. Unfavorable macroeconomic conditions, such as high inflation and interest rates due to last year's fuel price hikes, also affected investor interest.

Coordinating Minister for the Economy Boediono highlighted what he called recent improvements in Indonesia's macroeconomic conditions.

He said economic growth was on a steady and gradual upward trend, reaching 5.6 percent this year, and expected to hit 6 to 7 percent in the next three years.

Inflation, meanwhile, is projected at less than 7 percent this year, later falling to between 3 and 4 percent.

Indonesia is also improving its country risk, considered important for investment. The government's external debt has fallen to below 40 percent of the country's gross domestic product, from more than 100 percent in 1999.
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