[Kabar-indonesia] 9 Infrastructure Summit articles [FT; JP; Bloomberg; Reuters; AFP]

[Joyo at aol.com]

9 Articles:

- Indonesia's president courts investors at infrastructure
  summit

- Bloomberg: Yudhoyono Says Indonesia Needs $22 Billion of
  Annual Investment

- Indonesia aims to overhaul creaky infrastructure

- Indonesia Pres Expects "At Least" 5.6% GDP Growth In '06

- Indonesia says offers more infrastructure projects

- Indonesian president asks investors to spend US$22 billion
  on infrastructure

- FT: Indonesia woos investors for infrastructure plans

- JP: Indonesia's future depends on infrastructure [Op-ed by
  C. Lawrence Greenwood]

- JP Editorial: Better infrastructure deals

------------

Indonesia's president courts investors at infrastructure
summit

JAKARTA, November 1 (AFP) -- Indonesia's president urged
foreign and domestic investors Wednesday to stump up funds
to boost the nation's flagging infrastructure sector,
arguing that new laws would assure profitability.

Some 111 projects worth 19.1 billion dollars are to be
offered at the three-day summit opened by President Susilo
Bambang Yudhoyono, including 10 "model" projects worth 4.5
billion dollars, according to a statement from the
organisers.

The medley of projects on offer relate to toll roads,
drinking water, electricity generation, gas distribution and
piping, ports, airports, railways and telecommunications.

Growth in Southeast Asia's largest economy has been hindered
by a lack of investment in infrastructure in recent years,
leading to regular power blackouts, crumbling highways, an
overburdened phone network and crowded ports.

"We estimate that over the next few years we will need at
least 22 billion dollars per year to build infrastructure in
the energy sector, roads, ports, harbours, housing and water
sanitation" and so on, Yudhoyono said.

"The government will provide only part of this funding,
while the major portion will have to come from the private
sector."

Jakarta held its first infrastructure summit early last
year, soliciting bids for 91 projects worth 22.5 billion
dollars. Only nine deals however have since been secured.
Since then, Yudhoyono noted, he had issued a decree "which
outlined a more robust legal and regulatory framework for
public-private partnership, with strong emphasis on
transparency, fairness, a level playing field and mutual
benefit."

"We know full well that a prime consideration for the
private sector to invest is profitability," he said.

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

The standard of Indonesia's infrastructure has plunged in
recent years.

A government report this year showed Indonesia in 1996
outranked Thailand, Taiwan, China and Sri Lanka in terms of
infrastructure quality but the region's former economic
power now ranks close to bottom for most indicators.

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

"During the crisis years, we simply stopped putting money
into building infrastructure, a trend which we must now
reverse," he added, referring to the 1997-98 Asian financial
crisis.

An Asian Development Bank report this year showed that
Indonesia's infrastructure investment accounted for six
percent of gross domestic product before 1997, but now sits
at just two percent.

Vice president of the Asian Development Bank Lawrence
Greenwood told investors that Indonesia's challenge was to
create an environment that assured them of "predictability,
a level playing field, low transaction costs and fair rates
of return."

This would require reforms to permit increased competition,
independent regulatory oversight, clear rules and
regulations for infrastructure project proposals, tariff
regimes based on cost recovery and efficient dispute
resolution mechanisms, he said.

"Given its commitment and progress to date, there is good
reason to believe that Indonesia's climate for investment in
infrastructure will continue to improve," he added.

Analysts warned ahead of the summit that enthusiasm for
projects at the summit may be tempered by rampant corruption
and bureaucratic red tape afflicting the nation.

--------------------------------------------------------

Yudhoyono Says Indonesia Needs $22 Billion of Annual
Investment

By Arijit Ghosh and Wahyudi Soeriaatmadja

November 1 (Bloomberg) -- Indonesian President Susilo
Bambang Yudhoyono said the country needs to attract $22
billion of investment in roads, power plants and other
infrastructure each year to boost economic growth and create
jobs.

``Of all the challenges we face, infrastructure is on top of
the list,'' Yudhoyono told investors in Jakarta today. ``We
all know the importance of infrastructure, it reduces income
inequality and regional disparities. Our infrastructure
problem is quite simple -- there hasn't been enough of it.''

Efforts to lure investment have been stymied by regulations,
including rules that force companies planning to build ports
and airports to tie-up with state-run firms that also act as
industry regulators. Yudhoyono's two-year-old government has
struggled to meet pledges to streamline rules, eliminate
corruption and introduce more safeguards for foreign
investors.

The government has estimated it needs to attract $65 billion
by 2010 to boost employment, reduce poverty and increase
economic growth. Foreign direct investment into Indonesia
fell 44 percent in the first nine months of this year, the
country's Investment Coordinating Board said in a report on
Oct. 12.

A year ago, the government estimated it would need $150
billion of investment by 2009. In 2005, it offered 91
projects valued at $22.5 billion at its first infrastructure
investment conference. Of the six projects that were
eventually awarded, construction has started on one.

``Although not all targets posed in the infrastructure
summit 2005 have been met, we are learning from the
challenges and obstacles we faced,'' Boediono, Indonesia's
economics minister, said today in a speech. ``We are now
more realistic and understand that we must balance ambition
with credibility.''

Learning Lessons

At its second investment conference, which started today in
Jakarta, Indonesia is offering investors 10 projects valued
at $4.5 billion.

``It's encouraging to see that the government has learnt
some lessons from what happened in 2005, keeping its
objectives attainable, ensuring that the projects are ready
to roll and also providing risk-sharing,'' Lim Su Sian,
Singapore-based economist at DBS Group Holdings Ltd., said
in an e-mailed reply to questions today.

Indonesia, which plans to offer as much as 500 trillion
rupiah ($55 billion) of road, railway and power projects to
investors in the next four years, will set aside 2 trillion
rupiah in its budget next year to guarantee those
investments, National Planning Minister Paskah Suzetta said.

Compensation

Indonesia also may compensate investors if demand for a
completed project falls short of government estimates,
according to a decree by Finance Minister Sri Mulyani
Indrawati, released on June 2. Investors may receive money
or have operating concessions extended if they face a delay
in clearing land for approved projects, according to the
decree.
Yudhoyono pledged to reduce unemployment to 5.1 percent by
2009 from 9.7 percent in 2004. The unemployment rate rose to
10.4 percent in February from 10.3 percent a year earlier.

The government also pledged to cut by half the number of
people living below the poverty line to 8.2 percent by 2009.
Poor people, those surviving on less than 152,847 rupiah a
month, comprised 17.7 percent of the population in March,
from 15.9 percent in February last year, according to
government data.

Yudhoyono today reiterated the government's forecast for
economic growth of 5.6 percent this year. Indonesia cut its
growth target from 5.8 percent on Oct. 26 because of a drop
in investment.

Gross domestic product expanded 5.6 percent last year. The
International Monetary Fund expects growth in the $276
billion economy will slow to 5.2 percent in 2006.

--------------------------------------------------------

Indonesia aims to overhaul creaky infrastructure

By Ed Davies

JAKARTA, Nov 1 (Reuters) - Indonesia's president expressed
optimism on Wednesday the country would make progress in
funnelling billions of dollars into its crumbling
infrastructure with the support of foreign investors.

Indonesia has struggled to garner strong interest for
infrastructure projects from foreign investors, who cite
endemic graft, red tape, tough labour laws and an unreliable
legal system as making the country a poor investment choice
compared with regional rivals.

"I also have reasonable optimism that our infrastructure
development has bright prospects", President Susilo
BambangYudhoyono said in an opening address to an
infrastructure conference in the capital.

He estimated the country would need $22 billion per year
over the next two years to invest in infrastructure.

"The government will provide only part, while a major
portion will have to come from the private sector", the
president said.

"We all know infrastructure projects have long-term payback
periods and to provide you with greater security the
government is willing to enter into a reasonable degree of
risk sharing."

Indonesia held its first infrastructure conference in 2005
with an ambitious target of attracting financing for more
than 90 projects worth $145 billion, but there has been
little progress.

This time around a more modest figure of about $20 billion
worth of projects are being offered as the government tries
to focus on those that are more financially feasible for
investors.
About $4.5 billion of that would be for 10 "model" projects,
including power plants, toll roads and water supply systems
designed to show off reforms in transparency and the bidding
process.

The country badly needs the spending to help boost economic
growth and to fight poverty, as well as make a dent in
rampant unemployment and underemployment.

Indonesia has attracted some foreign names to invest in
infrastructure including Thames Water and Lyonnaise des Eaux
in water-supply projects in Jakarta, as well as Siemens and
Ericsson in telecommunication networks.

But Southeast Asia's largest economy still has huge needs.
Infrastructure investment has shrunk from 6 percent of gross
domestic product before the Asian crisis in the late 1990s
to 2 percent currently, according to a recent report by
CLSA.

Indonesia, the world's fourth most populous country, has one
of the most underdeveloped road networks per square
kilometre, while its air, rail and sea links also need major
overhaul. Electricity blackouts are regular.

Actual foreign direct investment (FDI) in Indonesia between
January and September fell 44 percent to $4.3 billion from a
year earlier, government data shows.

Illustrating the stifling bureaucracy, it takes 97 days to
set up a business in Indonesia, compared with just six in
Singapore and two in Australia, the World Bank says.

Transport Minister Hatta Rajasa told Reuters on the fringes
of the conference he was positive about the prospects of
getting more investment.

"We are optimistic. We have learned from the past."

------------------------------------------------------------
---------

Indonesia Pres Expects "At Least" 5.6% GDP Growth In '06

JAKARTA, November 1 (Dow Jones)--Indonesian President Susilo
Bambang Yudhoyono said Wednesday he expects the country's
economy to grow "at least" 5.6% this year, while inflation
should stay below 7%.

The government officially set a 5.8% growth target this year
after 5.6% growth last year, counting on an uptick in
government spending, improving exports and investment in an
environment of falling interest rates.

Yudhoyono also said Indonesia needs $22 billion in annual
infrastructure investment in the next few years. [ 01-11-06
0330GMT ]

"The government will pay only part of that (amount),"
Yudhoyono said at an infrastructure conference, indicating
that the remainder would come from the private sector.

During the conference, the government will offer 10 "model"
projects to local and foreign investors. Official approval
for this projects is to be fast-tracked.
The projects include three water supply projects, one ferry
terminal project, a port facility, two toll roads, one
telecommunications project and two electrical generation
developments.

The two-day event is a gauge of investor interest in
Indonesia, after a high-profile event last year failed to
spark much interest due to lack of government planning and
perceived regulatory hurdles.

The government has awarded tenders for only seven projects
out of 91 unveiled in January 2005, due to "continuing
incapacity to follow through on policies or regulations,"
the Asian Development Bank said last month.

The bank, which offered $4 billion of loans between 2006 and
2009 to help Indonesia upgrade its infrastructure, said
increased infrastructure investment is essential to meet a
6.3% GDP growth target for 2007.

------------------------------------------------------------
-------

Indonesia says offers more infrastructure projects

JAKARTA, November 1 (Reuters) - Indonesia said on Wednesday
it has offered an additional $14.7 billion worth of
infrastructure projects for investors at this week's
infrastructure conference, bringing total projects on offer
to almost $20 billion.

The world's fourth most populous country launched its second
major infrastructure conference as part of efforts to
attract foreign funds to help finance building toll roads
and power stations.

The government had said earlier it would offer 10
infrastructure projects worth around $4.5 billion during the
conference.

"Another 101 potential projects amounting to approximately
$14.7 billion have been prepared by the government and (are)
to be offered in this event," the government said in a
statement.

Despite the additions, the value of the projects offered at
this week's conference was much smaller than in a first
conference last year as the government tries to focus on
those most financially feasible for investors.

Jakarta held its first infrastructure conference in 2005
when the government sought to attract financing for more
than 90 projects worth $145 billion, but there has been
little progress.

Some analysts say graft, red tape, unfriendly bureaucracy,
tough labour laws and an unreliable legal system make
Indonesia a poor choice for investment compared with
regional rivals. (Additional reporting by Adriana Nina
Kusuma and Johannes Mantiri)

------------------------------------------------------

Indonesian president asks investors to spend US$22 billion
on infrastructure
JAKARTA, November 1 (AP) - Indonesia's president appealed to
foreign investors Wednesday to pump US$22 billion (€17.3
billion) into the country's dilapidated roads, power plants
and ports, saying the vast capital injection is needed to
tackle widespread poverty and unemployment.

Susilo Bambang Yudhoyono made the remarks at the opening of
the three-day Indonesian Infrastructure Conference 2006,
attended by 1,060 foreign and domestic capitalists from more
than 30 countries.

Indonesia, the world's fourth largest country, is pitching
111 infrastructure projects, the largest being a US$1.5
billion (€1.2 billion) fiber optic network and two coal-
fired power plants worth nearly US$2.48 billion (€1.9
billion).

Jakarta hopes to find money for dozens of ports, toll roads,
water processing facilities, electricity plants and
transportation routes neglected for decades under the rule
of former dictator Suharto.

Observers see the meeting as an important gauge for the
government's ability to revitalize weak private investment
after a failed conference in January 2005.

Yudhoyono sought to shake off the nation's poor reputation
as a place of investment, arguing that reforms are weeding
out rampant corruption.

"Our anti-corruption campaign is advancing by the day,
reminding our officials, former officials and ordinary
citizens that no one is above the law," Yudhoyono said.

--------------------------------------------------------

Financial Times (UK)
Wednesday, November 1, 2006

Indonesia woos investors for infrastructure plans

By John Aglionby in Jakarta

Indonesia is opening to investors up to 110 infrastructure
projects valued at $16.5bn (€13bn, £8.7bn) in an attempt to
invigorate its sluggish economic recovery after years of
crisis and poor management that triggered a collapse in
investment.

Ministers are hoping to convince 800 investors at a three-
day forum in Jakarta that they have learnt from the
disastrous first such conference in January last year, and
that conditions are now ripe to venture into what has long
been considered one of the most perilous sectors in a risky
investment environment.

Resistance from vested interests in the bureaucracy, rampant
corruption, the failure to create a more investment-friendly
climate by amending labour and tax laws, a messy
decentralisation process and a lack of legal certainty are
considered the main reasons for the prolonged inertia.

Of the 91 projects offered last year, fewer than a dozen
have been implemented. Some of the remainder have been
rewritten and are being re-offered this week.
"Since [January 2005] there have been improvements and some
developments," said Boediono, the senior economics minister.
"We have prepared much better this time."

The new strategy has three main strands. The first was to
identify 120 regulations needed to ensure legal certainty
and boost investor confidence. Mr Boediono told the
Financial Times that about 60 per cent of these had been
implemented and all should be in place by early next year.
These include a risk-sharing package between the government
and investors, a government infrastructure fund of Rp2,000bn
($221m) and a land acquisition fund of Rp 600bn for this
year and Rp400bn for next year. They do not include any tax
breaks.

"In principle government support and risk sharing is there
so infrastructure development can proceed," said Sri Mulyani
Indrawati, the finance minister.

The second strand is a focus on 10 "model" projects valued
at $4.5bn. "These have been prepared to international best
practice and are ready to go now so we can create some
momentum and show we are serious," Mr Boediono said. These
are three water supply projects, a ferry terminal, a port,
two toll roads, a telecommunications scheme and two power
projects. The remaining projects are expected to take some
weeks to finalise.

The final innovation is that ministers will hold "surgeries"
every day at the conference. "The aim is for investors to be
able to ask them anything they want," Mr Boediono said.

Lawrence Greenwood, a vice-president of the Asian
Development Bank, told the Financial Times he thought the
government had made "important progress" and was "well
prepared". "This is the coming-out party for the new
framework," he said. But he warned the government it needed
to be "bolder in terms of development spending" if it wanted
to entice the private sector to invest.

Before the 1997 Asian financial crisis, the government spent
about 6 per cent of gross domestic product on development.
That fell to 1 per cent in 2000 and is now 2 per cent. The
consequence of this, said Mr Greenwood, was that Indonesia's
infrastructure was, in general, "significantly substandard"
and in water supply and sanitation, "abysmal".

Infrastructure experts agree. "President [Susilo Bambang]
Yudhoyono was right to make infrastructure a platform of his
government but the performance has been slow and
disappointing," said Scott Younger, president commissioner
of Nusantara Infrastructure.

This lethargy has caused foreign investors to turn their
backs on Indonesia. Foreign investment in the first nine
months of the year fell 44 per cent to $4.29bn compared with
the same period a year ago.

However, the government estimates at least $65bn will have
to be spent on infrastructure by 2009 to achieve its growth
target of 7.6 per cent, of which it will be able to
contribute only $25bn.

Despite the government's upbeat talk, investors will take a
lot of convincing. "The president and cabinet are aware of
the problems, and some senior officials are very aware of
the problems, but the bureaucracy seems so unwilling and
unable to move quickly," said Peter Fanning, the chairman of
the International Business Chamber, a group of 16 Jakarta-
based foreign chambers of commerce.

---------------------------------------------------------

The Jakarta Post
Wednesday, November 1, 2006

Indonesia's future depends on infrastructure

C. Lawrence Greenwood, Jakarta

In Asia, countries that put the money and political will
into building infrastructure are rewarded with dynamic
economic growth. Just look at some of the world's best
performing economies: China, Malaysia, Singapore, Thailand,
and Viet Nam. All have made the development of
infrastructure a priority.

Indonesia was on that same fast track to economic prosperity
before the Asian financial crisis hit in the late 1990s. The
country spent more than 6 percent of GDP, or about US$15
billion a year, on infrastructure before the meltdown.
Today, that figure is down to 2 percent of GDP and most of
that is spent on maintenance. In particular, private sector
investment in infrastructure dropped from about $8 billion
in 1996 to $0.6 billion in 2003.

`The World Economic Forum 2006 report ranks Indonesia at
only 89th in terms of basic infrastructure provision out of
the 125 countries surveyed. Inadequate infrastructure
provision in turn keeps other investments away from the
country. `To expand and maintain the roads, bridges, water
systems, and the other hardware that keeps society
functioning, it is estimated that Indonesia needs to spend
more than $70 billion on infrastructure investments over the
next five years. `Such investment cannot come too soon. In
Indonesia today there are still about 50 million people
without access to treated water, 90 million without
electricity, and close to 200 million without direct access
to a phone or sewage network.

Those hit hardest by infrastructure deficiencies are the
poor. A lack of access to safe water and sanitation services
keeps people sick and struggling. Poor roads in isolated
areas keep people in poverty because they deny access to
economic opportunities. Nearly one out of five rural
villages in Indonesia is inaccessible for part of the year.

Fortunately, the country's leaders recognize the gravity of
the situation and have launched a major reform and
investment initiative in infrastructure. Indonesia
Infrastructure 2006, a global conference on this issue being
held from Nov. 1 to 3 in Jakarta, is attempting to address
these urgent problems by reforming the way infrastructure is
financed and built in the country. The conference builds on
the success of a similar meeting last year.

The Asian Development Bank is working with the government to
restore infrastructure to place Indonesia again on a high-
growth path. ADB has provided over $7 billion in loans -- or
over a third of its assistance -- for infrastructure
projects in Indonesia, with a focus on energy, sustainable
water, sanitation, and transportation.

The government has so far made significant progress,
launching measures to improve the way institutions assisting
Indonesia coordinate with each other. It has also taken
steps to ensure a more predictable business climate -- one
that provides a more level playing field and offers
assurance that investors can reasonably expect a fair rate
of return commensurate with the risks taken. Such actions
are already paying dividends with rising investor interest
and confidence being seen.

First and foremost, the country needs to prepare bankable
projects.

Second, in parallel, it has to reduce competing and
conflicting interests, and change the mind-set of some of
those who are used to doing things the old way.

Third, the rules of the game need to be made consistent
across all players and all infrastructure sectors. This
applies in particular to the principles of project quality,
legality, competition and transparency. Effective and
consistent implementation of reforms is vital. The absence
of a stable and predictable legal and regulatory environment
will impede the private sector investments needed to fill
the infrastructure gap. Fourth, the risks involved need to
be managed transparently, prudently and efficiently.

Finally, it is a matter of great urgency that reforms
continue in the country, and that efforts to improve
governance and the investment climate persist. Otherwise,
Indonesia stands to pay a much higher price later.

The writer is a Vice-President of the Manila-based Asian
Development Bank.

------------------------------------------------------------
-------

The Jakarta Post
Wednesday, November 1, 2006

Editorial

Better infrastructure deals

The three-day Indonesia Infrastructure Conference and
Exhibition 2006 (IICE) opening here today could be the last
big opportunity for the country to sell major infrastructure
projects to investors after the failure of the 2005
Infrastructure Summit.

Preparations for this year's event, already postponed twice
from the originally scheduled last February and then June,
are much better, with the introduction in February of 153
new policy measures in the 2006 infrastructure reform
package. Even though only 50 percent of the measures had
been executed as of last month, the investment and
regulatory climate for the dozens of projects to be offered
during the IICE is much brighter.

A number of important measures have already been
implemented, including the establishment of an
infrastructure fund management body, a revolving fund and
easier procedures for land acquisitions, and better
frameworks for the management and sharing of risks and for
public-private partnerships in infrastructure projects.

Significant improvements also have been made in regulations,
licensing procedures and financing incentives. Indeed, the
experiences of other countries that have successfully
attracted huge private investments in infrastructure
development show that sensible, effective regulations are
the key for infrastructure development.

The government also has set clearly defined provisions for a
number of projects to ensure their financial sustainability,
while at the same time still protecting consumer interests.
This arrangement will guarantee that right from the start,
tariffs for infrastructure projects are set at adequate
levels to cover the costs of investment and operations, plus
a reasonable profit margin.

If this is not possible, the government will make up for the
shortfall in the form of compensations or subsidies. This
scheme will provide the service operators an opportunity to
earn a reasonable return on their investment, because
pricing and performance issues are critical for the success
of most private participation in infrastructure projects.

In addition, the government will set up a guarantee fund for
investors to cover losses caused by social, political or
policy changes.

All of these facilities will certainly help improve the
investment climate in infrastructure development, which
requires long-term investment, financed mainly with long-
term debt instruments such as bonds from the capital market
and foreign exchange funds, while revenues from
infrastructure are denominated in rupiah.

Yet, most importantly, as the IICE organizing committee
explained, is that the dozens of projects on offer during
the IICE include 10 model projects valued at US$4.5 billion.
These projects include power plants, turnpikes, seaports,
municipal water systems and telecommunications, spread out
across several provinces.

They are classified as model projects because they are the
best-prepared in terms of field preparations, public-private
partnership arrangements, implementation timelines,
financing options, pricing and regulatory systems, and even
dispute-settlement mechanisms.

Private participation in infrastructure development not only
is vital for the liquidity-strapped government, but also
offers many advantages such as better focused management,
improved efficiencies and access to capital markets.

The government therefore needs to demonstrate policy
cohesiveness to the participants at the IICE. This means
that local administrations also must be well informed and
fully supportive of the projects to be offered. Without
support and cooperation on the part of regional governments,
infrastructure development will never run smoothly. Since
the IICE coincides with the two-day Regional Investment
Forum opening Thursday, the two events can supplement each
other in wooing investors.

Another disastrous showing like last year's Infrastructure
Summit will destroy whatever little confidence investors
still have in the government's policy-making ability and in
the investment climate.

Infrastructure is vital, not only for businesses but also
for the people, particularly the lower classes. Poor
infrastructure impairs the competitiveness of the economy,
as production and distribution are made grossly inefficient
and unusually expensive. But inadequate infrastructure, such
as poor roads, also hinders access to public services such
as healthcare, education and markets, thereby hampering
poverty alleviation efforts.

------------------------------------------
Joyo Indonesia News Service
------------------------------------------