State-funded projects to roll in next two weeks

Aditya Suharmoko, The Jakarta Post, JAKARTA | Fri, 03/06/2009 9:05 AM  

State-funded projects will begin construction within the next two weeks, kickstarting this year's massive infrastructure program, a minister says. 

The projects will be financed by the Rp 12.2 trillion fund for infrastructure, as part  of the Rp 73.3 trillion set aside by the government under its stimulus package to help cushion the impacts of the global economic crisis.

"Ministries [which are implementing these projects] will hand their documents to the Finance Ministry on March 11, and the projects can be started at the latest March 18," Finance Minister Sri Mulyani Indrawati told a media conference Thursday.

Mulyani said the effect of the infrastructure stimulus should be felt at the latest in June. "The impact of physical projects are usually felt within two months. So, in May or June we should feel it."

The National Development Planning Agency (Bappenas) will oversee the implementation of the projects funded by the stimulus. "Ministries that fail to absorb the funds will get their allocation cut in next year's budget," she said.

Public Works Minister Djoko Kirmanto, whose ministry received a large part of the stimulus, said the project tenders were "almost settled", meaning tender results were coming in and work could start soon.

The Rp 12.2 trillion fund will come on top of around a massive Rp 150 trillion to be spent on infrastructure projects this year, two thirds of which is due  to come from the state budget and the rest from the state enterprises. 

Infrastructure development is highly crucial for Indonesia's economy, especially with exports down. These government-led infrastructure projects will be a major factor propeling the economy to reach 4.5 percent economic growth this year.

However, while the financing for state-approved projects has been largely secured, the country will still have difficulties attracting the participation of the private sector in the longer term, unless it can provide incentives such as guarantees on infrastructure projects, said experts at a conference on Thursday.

Asian Development Bank (ADB) principal infrastructure specialist Bob A. Finlayson said the current global economic crisis had increased the uncertainties for investors.

"There's still a lot amount of money out there, but people aren't going to take decisions quickly. 

It's possible [they will disburse funds] to selective good projects," he said.

According to  Bappenas, between 2010 and 2014 the country will need a gigantic Rp 1,429 trillion of funds for infrastructure projects. But the government could only provide about 31 percent, or Rp 451 trillion, with the rest to be funded through public-private partnerships.

Bambang Susantono, deputy to the Coordinating Minister for the Economy on infrastructure, said the government, knowing the private sector would be selective in "cherry-picking" projects, realized the private sector needed incentives.

For example, there is a guarantee fund provided for in the 2009 state budget, which means government can help underpin "political risks",  to  cover the project risks  related to government policies, he said.

The government has also established the Indonesia Infrastructure Fund Facilities (IIFF) to secure funds for infrastructure financing. 

10 ministries getting the biggest infrastructure stimulus funds: 

• Public Works (Rp 6.5t)
  
• Transportation (Rp 2.2t)
  
• Energy, Mineral Resources (Rp 500b)
  
• People's Housing (Rp 400b)
  
• Maritime and Fisheries (Rp 100b)
  
• Agriculture Ministry (Rp 650b)
  
• Trade (Rp 335b)
  
• Manpower (Rp 300b)
  
• Health (Rp 150b)
  

Source: Office of the Coordinating Minister for the Economy