Investors want legal certainty before proceeding

Benget Simbolon Tnb., The Jakarta Post, Jakarta

After attending the three-day Infrastructure Conference and Exhibition 2006, investors say they are now eagerly waiting for the government to deliver on its promises of creating legal certainty for the hundreds of infrastructure projects it offered during the event.

"Businesspeople are now very excited that the legal framework exists. So, they're now waiting for the project preparations to be launched," said Herman Vegara, the Indonesia country manager of the International Finance Corporation, the private-sector arm of the World Bank, after attending a discussion organized by the IFC on Friday.

During the summit, the government put 10 so-called "model" projects, valued at US$4.4 billion, up for grabs. In addition, some 101 projects valued at approximately $14.7 billion were also put on the table.

"But I'm not going ahead with anything until everything is clear, including government support for project development," said James Thomas, the business-development director of Power Asia, which is constructing a 600-Megawatt power plant in Cirebon, West Java, and is interested in a number of other power projects in Central and East Java.

Meanwhile, Vegara noted that project preparation would be the key from now on, adding that the government had to make sure that the statutory and regulatory environments would not be changed dramatically to the detriment of investors.

"The government needs to create support mechanisms right away, and over the long term it needs to ensure that the right regulatory environment is in place. And that will take some time," said Vegara.

Vincent Ariesta Lie, a lawyer with the Ali Budiardjo, Nugroho & Reksodiputro law firm, said that if the projects were well structured and legally well designed, then investors and financiers would be interested.

"We noticed during the discussions at this summit that the investors were mostly concerned with legal certainty as regards the projects. If there is legal certainty, then funding won't be a problem," he said.

Meanwhile, James said that the government had to resolve the land acquisition problem and provide the necessary guarantees in order to speed up the development of the projects.

"Land acquisition is a tedious and long drawn-out process. So, in order to speed up the development of the projects, the government should focus on that issue and resolve it," he said. "And it has to be consistent. Once it issues a regulation and a plan, it should stick to them."

He said that state-owned electricity utility PLN could face a credit-risk problem. "That means that the government needs to underwrite any contracts that PLN enters into with investors. Thus, it will need to guarantee that PLN will pay all of its liabilities under the contracts," he said.

During the discussions at the conference, speakers underlined the importance of transparent processes and government support to ensure that the infrastructure projects were properly prepared and implemented.

Vice President Jusuf Kalla said Thursday that the government would do its best to create a better business climate so that investors could get on with their projects.

As parts of these efforts, the government had drafted a new investment bill that was now awaiting approval from the House of Representatives. The House is also deliberating bills amending the four existing transportation laws -- on railways, and land, sea and air transportation.
_________________________ Indonesian Business and Investment News Aggregator