[Kabar-indonesia] AFR: Jakarta Observed: Struggle to build confidence

[Joyo at aol.com]

Australian Financial Review
Wednesday, November 1, 2006

Jakarta Observed

Struggle to build confidence

Morgan Mellish

On Monday, organisers of Indonesia's second infrastructure
summit called a press conference to discuss the three-day
get-together, which officially opens today.

At the press conference, which started an hour late, the
deputy minister for Infrastructure and Regional Development,
Suyono Dikun, and deputy chairman of the Indonesian Chamber
of Commerce, Chris Kanter, were asked how many major
projects the government would offer potential investors.
They couldn't say.

They were then asked the total value of the projects. They
didn't know that either. Everything was still being worked
out, they said.

With investors flying in from more than 30 countries to hear
the government's pitch, it was a performance that did
nothing to boost confidence in Indonesia's ability to solve
its infrastructure woes.

For years, government officials have been saying they want
to build privately financed projects to help the country
develop. But few foreign firms have been prepared to take on
the risks, which include a complicated tendering process as
well as a corrupt legal system and bureaucracy.

The experience of the past two years is worth recounting. In
January last year the Yudhoyono government held its first
and much-heralded infrastructure summit. It offered domestic
and foreign companies a chance to invest in 91 projects
worth $US22 billion.

However, more than 18 months later, the government has
awarded tenders for only about seven projects. For example,
out of 1835 kilometres of toll road that was offered to the
private sector, just 47 kilometres is operating, while
another 74 kilometres is under construction.

As the second conference gets under way, there is not much
confidence anything has improved.

"Investors have very little confidence in the ability of the
government to deliver on its promises," says Peter Fanning,
chairman of the International Business Chamber. "A ministry
might be very willing but the legal system is still not
sufficiently strong to back undertakings."

The Asian Development Bank has warned increased
infrastructure investment is essential for Indonesia to meet
its 6.3 per cent growth target for 2007. The developing
nation has projected 5.8 per cent annual gross domestic
product growth in 2006, compared with the 5.6 per cent
expansion last year. Kanter, who is chairman of the
organising committee, says the first summit effectively
failed because the government was not ready.

"In the first summit we have to understand that the
ministers had just taken office two months before and they
were still busy with the 2004 tsunami," he says.

"What we offered back then was simply a list of projects
from the ministries, several of which were still at the raw
proposal stage."

However, Dikun says the government has learnt lessons from
last year's less than successful summit and only projects
that were ready to start and were "bankable" would be
offered to investors this time.

He says there are 10 model projects that were technically
and administratively ready to be executed that would be on
offer. These would be used as blueprints for later
developments and included water supply facilities, a ferry
terminal, a port, toll roads and power plants. Many other
projects would be announced by individual ministers during
the conference.

"We have made improvements to our preparations and the
tender process," Dikun says. "These 10 projects will be
examples of how the government prepares projects, including
bidding documents."

Despite the concerns about the government's readiness and
the lack of bureaucratic reform, it's expected that about
350 foreign investors and nearly 500 local businessmen will
attend the conference.

Macquarie Bank executive director Nick van Gelder is
speaking at the conference.

"Macquarie is interested in the toll road business around
the world and we'd be interested in toll roads in Indonesia
provided feasible and attractive projects can be provided to
the private market," he says.

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Joyo Indonesia News Service
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