[Kabar-indonesia] Let's share the risks, Kalla says [4 articles]

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4 articles:

- Let's share the risks, Kalla says

- U.S. firm sets sights on purchases in RI

- Firms eye up 3 water-supply projects

- Minister says projects spark investor interest

The Jakarta Post
November 3, 2006

Let's share the risks, Kalla says

Urip Hudiono, The Jakarta Post, Jakarta

Having instituted a number of key policy reforms to pave the
way for greater private-sector investment in Indonesian
infrastructural development, Vice President Jusuf Kalla said
the government was now ready to fast-track important
projects.

The government will also continue working to reduce the
country's notorious corruption and red-tape, Kalla told
investors attending the second day of the Indonesia
Infrastructure Conference and Exhibition 2006 on Thursday.

"You've come here for business, so let's simply make things
business-to-business," Kalla said in his usual frank manner.

"Business for you, business for the people."

Kalla, a businessman-turned-politician, acknowledged the
many risks facing investors who were willing to put their
money into long-term infrastructure projects in Indonesia.
However, he stressed that if they were commercially viable,
they would always be worth considering.

He said that this was particularly the case now that the
government was willing to provide risk-sharing and guarantee
schemes as part of an improved private-public partnership
framework.

"Of course there are risks, but no risk, no gain," he said.

"So, if there's a risk, then we can share it. With all this,
all you have to do is to come here and invest in projects
that are ready to go."

Kalla gave as an example investments in the construction and
operation of power plants, the risks of which the government
would indirectly guarantee through its budgetary subventions
to state power firm PT PLN.

Independent power producers (IPP) sell their output to PLN.
However, due to PLN's public service obligation to keep
prices affordable to the public, discrepancies between
charges and production costs could arise. It was these
discrepancies that will be covered by the government's
subventions, Kalla said.

Finance Minister Sri Mulyani Indrawati estimates that the
government will provide a subvention of Rp 35.5 trillion to
PLN in next year's budget.

Kalla also highlighted the commercial potential of toll-road
projects in Indonesia, referring to Java island's congested
north-coast route as an example.

"This means people's incomes have risen so that they can
travel, and thus they will need more roads," he said.

"This is a business opportunity for you, because I'm sure
people are willing to pay for a reduced journey time of only
five hours on a toll road, for example, rather than 10 hours
with a kilometer-long tailback on the old roads."

Regarding land-acquisition problems in turnpike projects,
Kalla said the government would overcome this through its
"revolving land fund". The fund, together with the
"guarantee fund", would form part of the proposed overall
"Infrastructure Investment Fund".

He said that the government was working hard to overcome the
twin evils of corruption and red tape, as could be seen from
recent crackdowns on graft in public procurements and
project tenders, as well as the efforts being made to
improve tender processes in the infrastructure sector.

"We have set up special teams in each of the relevant
ministries to ensure that the bidding and tender documents
for every project are transparent, and the projects
themselves are carried out as they should be."

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The Jakarta Post
November 3, 2006

U.S. firm sets sights on purchases in RI

Tony Hotland, The Jakarta Post, Jakarta

U.S.-based private equity company Texas Pacific Group (TPG)
said Thursday it had set up a local subsidiary, Northstar
Equity Partners, as a reflection of its growing interest in
investing in Indonesia.

TPG is the world's second biggest buyout firm and is
reported to have about US$45 billion in assets at its
disposal. It has acquired stakes in several major
international corporations, such as Baxter International
Inc. and Burger King.

TPG chairman David Bonderman met Thursday with President
Susilo Bambang Yudhoyono at the latter's office, just a day
after Yudhoyono opened the three-day Indonesia
Infrastructure Conference and Exhibition 2006.

"Indonesia's economy is growing, a resource-based economy,
so we feel now is the right time to start investing," said
Bonderman.

Among those accompanying Yudhoyono were Coordinating
Minister for the Economy Boediono, Finance Minister Sri
Mulyani, Transportation Minister Hatta Radjasa and State
Minister for State-owned Enterprises Soegiharto, while
Bonderman was accompanied by TPG managing director Tim
Dattels and Northstar Equity Partners managing director
Patrick Wallujo.

Wallujo said Northstar had start-up capital of $100 million,
although he said this figure could grow depending on the
value of prospective investments.

"We are looking at the infrastructure sector as well as
natural resources, such as biofuel energy and plantations,"
he said.

Later on, Bonderman met with Vice President Jusuf Kalla, who
was accompanied by Emirsyah Satar, the president director of
state-owned airline PT Garuda Indonesia, prompting
suggestions that the American firm might be interested in
acquiring a stake in the debt-ridden airline.

During a question-and-answer session at the presidential
office, presidential spokesman Dino Patti Djalal abruptly
cut short a journalist who had asked Bonderman whether
Northstar was interested in taking a stake in Garuda.

Garuda has long been a chronically loss-making venture,
reportedly primarily due to mismanagement. It is seeking to
restructure its $794 million debt, while the government is
weighing up the options of either injecting fresh capital
into the airline or selling it to investors.

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The Jakarta Post
November 3, 2006

Firms eye up 3 water-supply projects

Andi Haswidi, The Jakarta Post, Jakarta

Three private firms have expressed a keen interest in
investing in three water-supply projects worth Rp 1 trillion
(around US$109 million) that have been put on the table by
the government at the Infrastructure Conference and
Exhibition 2006.

"Many investors are interested in our water projects. At
least three of them have directly approached me today and
stated their intention of tendering for piped-water
projects," Public Works Minister Joko Kirmanto said at the
conference in Jakarta on Thursday.

Joko said the three companies were Tyco Water of the U.S.,
Ami Water from Singapore and a local firm from East
Kalimantan.

During the three-day infrastructure forum, which will end
Friday, the government is offering three water-supply
projects that will serve as models for private-public
partnership (PPP) projects in the water sector.

The three projects are the Bandung water-supply scheme,
which is worth Rp 300 billion, the Tangerang water-supply
scheme, worth Rp 300 billion, both of which are located in
West Java, and the Dumai water-supply project in Riau
province, which is worth Rp 400 billion.
Joko said that the three companies had already conducted
studies at the project locations, which would give them an
advantage in submitting unsolicited bids.

The tenders for the projects will be launched this month,
while pre-feasibility studies will be conducted in November,
prequalification in December and acceptance of the final
bids by as early as January 2007.

The government is aiming to tackle the chronic
underdevelopment of the country's water-supply sector. At
present, about two-thirds of Indonesia's 220 million people
do not have access to a clean-water supply.

In cities, piped-water coverage averages only about 39
percent, while in rural areas coverage averages less than
eight percent.

Under a 2005 presidential regulation, PPP projects can be
identified and initiated both by the government and the
private sector, but the private-sector promoters must be
selected through an open and transparent tender.

The regulation permits tariffs to be set so as to allow for
full-cost recovery. Should full-cost recovery exceed the
ability of consumers to pay, the government must make good
the difference through the payment of a subvention to the
operator.

One possible problem facing PPPs is resistance from regional
governments in the form of bureaucratic, anti-private sector
ordinances.

Aware of this possibility, Joko said that he had ordered the
Water Supply System Development Supporting Agency to assist
investors when dealing with local administrations.

"I am sure that every regional government wants to work for
the benefit of its residents. Local administrations will be
allowed to stipulate their own rules as long as these don't
conflict with our national objectives," he said.

The minister also said there would be no restrictions on
which parts of the country investors, whether local or
foreign, would be allowed to develop projects.

"Any restrictions will be set by the market itself. I don't
think that many big overseas companies will want to invest
in rural areas that can only generate insignificant
revenues. They will aim for the big cities and leave the
rest to the local government water utilities," he said.

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The Jakarta Post
November 3, 2006

Minister says projects spark investor interest

Benget Simbolon Tnb., The Jakarta Post, Jakarta

While he acknowledged that the government needs to enact
further reforms to create a better business climate,
Coordinating Minister for Economic Affairs Boediono said
Thursday that Indonesia had gotten a positive response from
foreign investors on developing infrastructure projects
here.

"With this summit we regain the momentum to boost the
development of our infrastructure. We now see that we're on
the right track toward reaching our goal," Boediono said on
the second day of the three-day Indonesia Infrastructure
Conference and Exhibition. The event has drawn about 1,200
businesspeople, mostly representing foreign companies.

"We haven't yet reached any deals with foreign investors,"
he added. "But we've seen very strong interest from them
during this summit.

"I'm optimistic that we'll win their commitments to develop
the projects we're offering," he concluded, saying he
believed this year's meeting would prove to be more
productive than the previous one.

Last year, the government offered a total of 91
infrastructure projects. But so far, only 24 projects,
valued at US$6 billion, have gotten commitments from
investors.

This year, the government is highlighting 10 so-called
"model projects" valued at $4.4 billion. A further 101
projects valued at approximately $14.7 billion are on offer.

The 10 model projects and the 101 potential projects include
toll roads, drinking water, electricity, gas,
transportation, and telecommunications infrastructure.

Vice President Jusuf Kalla said later in the day that the
government would continue to do its best to create more
attractive conditions for investors to do business in
Indonesia.

As part of those efforts, the government has submitted a
bill to the House of Representatives aimed at creating
better conditions for investment in the country. The
proposal is expected to pass before the end of this year.

Transportation Minister Hatta Rajasa said Wednesday that the
House of Representatives was also considering four bills
concerning land, sea, air and rail transportation. The bills
would end the government's monopoly and allow private
companies to fully own, build and operate transportation
projects.

Boediono said the government was also designing regulations
to keep land acquisition problems from hampering highway
projects in the future.

The administration has established a revolving fund to be
used to acquire land for infrastructure projects. Later, the
investors concerned will repay the government for the land.

Boediono also noted that the government's eagerness to
attract foreign investors to develop infrastructure did not
spring from an unwillingness to do so on its own part.

"This is because we're facing a shortage of funds from
domestic sources," he said.
He added that the government would also very likely tap into
the Islamic-based financial market to fund infrastructure
development.

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Joyo Indonesia News Service
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