Friday, February 04, 2005

Govt red tape retards infrastructure investment

Source: The Jakarta Post

Last month's much-hyped Infrastructure Summit has apparently not been able to spur government bureaucrats into action, particularly on the issue of promised regulations to streamline the process for foreign investors.

Prior to the summit -- in which 91 infrastructure projects worth US$22.5 billion over the next five years were offered to domestic and international investors at the Jan. 17 and Jan. 18 event -- the government has prepared 11 government regulations and three presidential decrees as the legal basis for those projects, but those will take several months to implement.

"We (the government) can't issue the regulations any time soon because our workload in the first three months has been too much. It has been very difficult to issue new regulations," State Minister of National Development Planning Sri Mulyani Indrawati said on Thursday.

The main obstacle for the planned issuance of the regulations, she said, was that the many of the drafts could contain articles that are in conflict with other laws. That would mean even more time as the government would have to revise the laws to be consistent with the new regulations.

"We must maintain legal consistency between existing laws and new regulations. We must also take into account the impact of our long-term development programs. We must meticulously arrange the regulations to avoid legal uncertainty in the future," Mulyani explained.

Sri would not venture a guess as to when the reform-oriented regulations would be issued.

Legal uncertainty is one of the main concerns for foreign investors, in addition to the out-of-control corruption here. They have expressed fear that legal uncertainty would result in legal disputes, either with local partners or with the government.

Investors have also proposed the possibility of obtaining legal protection and guarantees directly from the central government in developing infrastructure projects.

Meanwhile, a source at the Office of the Coordinating Minister of the Economy said the government might "take months" before completing the new regulations since it has to revise a number of laws with the House of Representatives before they are endorsed.

"It is such a mess. It will take months before the regulations on the incentives can be implemented," said the source.

The government is in dire need of a whopping $150 billion in new investment for the development of roads, power plants and other crucial infrastructure facilities over the next five years.

Some 55 percent of the funds, or around $80 billion, is expected to come from outside Indonesia in the form of foreign direct investment or loans from donor countries and agencies, while the rest will be from domestic resources.

Among the regulations promised to investors is their ability to negotiate toll rates and concession periods with the government in order to enable investors to calculate the cost feasibility of projects.

Another promised regulation is on the government's assistance to the investors in acquiring land for toll road projects, including the avoidance of lengthy negotiation periods and disputes with local land owners over the compensation price.

Another proposed regulation will require local administrations to protect land allocated for toll roads by maintaining the land price in the areas, in order to prevent unscrupulous brokers from increasing prices.