Wednesday, April 20, 2005

Urban infrastructure needs better incentives

Source: The Jakarta Post

Owing to rapid urbanization, the need for urban infrastructure will continue to rise, therefore the government needs to invigorate regulatory frameworks and offer better incentives to attract investment into the urban sector.

J. Scott Younger, commissioner at Glendale Partners who provide project management and finance advisory services, predicted on Tuesday that by 2025 Indonesia's population would be 55 percent urban, from about 35 percent in 2001.

This continued urbanization would force the expansion of existing major cities, including Jakarta, Semarang, Surabaya, Medan, Batam, Balikpapan, Samarinda, Makassar and towns in southern Bali.

"That needs long-term masterplanning for key expanding urban areas, but that basically does not exist today," Younger told businesspeople at the Australia Indonesia Business Conference.

Such rapid urbanization will automatically open business opportunities in various sectors in those cities to cater to the needs of rising urban populations.

They include opportunities in service industries, property, construction, and operation and maintenance of infrastructure.

Urban infrastructure dominates in the government's list of 91 projects offered to local and global investors earlier this year, with 37 projects for toll roads and 24 for the water sector, to name a few.

The offering of these toll road and water sector projects was made possible with the passage of road and water laws last year. Nevertheless, Younger expressed his concern that the water law might be invalidated by the Constitutional Court, as happened with the electricity law.

"There was progress made both in the road and water laws last year, and we must go forward and not back because water is critical," he said. "If the Constitutional Court screws things up, then the whole thing will go back, and this will be a disaster."

Therefore, the government needs to anticipate this and devise alternative ways to protect investors.

The government should also start thinking about attracting early investment in all forms of transportation facilities around major conurbations, especially Jakarta and Surabaya. -- JP/Riyadi Suparno