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

SMI to revive development of stalled projects

Benget Besalicto Tnb., The Jakarta Post, Jakarta  , |  Sat, 02/28/2009 2:22 PM  

The government has formally established a financial firm to manage the infrastructure fund, PT Sarana Multi Infrastruktur (SMI), which will include a focus on financing several stalled infrastructure projects.    

The deputy to the coordinating minister of economic affairs in charge of infrastructure, Bambang Susanto, said Friday the firm will work on several stalled projects include the Rp 80 trillion (US$9 billion) Trans-Java Toll Road, and the Rp 4.6 trillion Jakarta-SoekarnoHatta railway project. 

The new institution starts operating in April with an initial capital of Rp 1 trillion allocated from the 2009 state budget, and will get more financial support from the Asian Development Bank (ADB) and World Bank (WB), up to Rp 2 trillion. 

"For additional funds we plan to issue bonds. I'm optimistic that it will manage to get a total fund of up to Rp 20 trillion in the next two to three years. With the support of reliable institutions such as ADB and WB, and the prospects for our infrastructure projects, it won't be difficult to realize the target," he told The Jakarta Post. 

Several big infrastructure projects are stalled mainly due to financing and land clearing problems. These include electric power plants, the proposed double-track railway linking Jakarta and Surabaya, and the monorail project in Jakarta. 

Bambang said that the government has also named members of the SMI board of directors and board of commissioners, but refused to elaborate further; saying Minister of Finance Sri Mulyani Indrawati will announce (the details) soon. 

He added that SMI will also be a shareholder in some infrastructure projects. 

"The SMI will act as a holding company as it will later have several subsidiaries. The Indonesia Infrastructure Fund Facility (IIFF) will be one of its subsidiaries," he said 

However, he noted that the SMI would not fully finance the infrastructure projects. It will establish a consortium for every project. In some cases the loans will stand as bridging loans, mainly aimed at securing long term finance.

Guarantee fund to go into effect this year

Benget Besalicto Tnb., THE JAKARTA POST, JAKARTA | Mon, 02/23/2009 10:53 AM  

The government will start operating the infrastructure guarantee fund this year with an initial fund of Rp 1 trillion allocated from the 2009 state budget, a senior official said Saturday. 

“We’ve finalized the draft of the regulation on the guarantee fund; now we’re waiting for President to sign it,” Bambang Susantono, infrastructure deputy to the coordinating minister for the economy, told The Jakarta Post. 

“I think we can start in the next few months.” 

He added the guarantee was “necessary to attract investors in developing infrastructure projects”. 

It was also important, he went on, to avoid any cancellation of infrastructure development, which is badly needed by Indonesia to accelerate economic growth and improve competitiveness at the international level, which is on a decline. 

He said the government regulation would rule what kind of infrastructure projects need to be guaranteed if there was any policy change made by governments. 

In the case of investors canceling projects due to policy changes on part of the government, the government may be required to pay financial compensation to the investors. 

Such stipulations are detailed in the upcoming government regulation. 

All of the guarantee fund will be used to guarantee infrastructure projects under the public private partnership (PPP) schemes for the next five to 10 years. 

“The existence of the fund will only be aimed at guaranteeing that the next governments will not make any changes to the agreed contracts already signed by previous governments,” Bambang said. 

But he added he could not yet disclose what projects would be guaranteed and how much each of them would be guaranteed for. 

“We’re waiting for the government regulation to be approved,” he explained. 

He also said part of the guarantee fund would be allocated from the state budget, while the rest would be in loans sourced from the Asian Development Bank (ADB) and the World Bank. 

The guarantee fund will differ from the planned infrastructure fund, which is also set to be established by the government soon to facilitate the financing of infrastructure projects. 

Due to the frequent shortages of funds for infrastructure development, the government recently announced the planned establishment of the Indonesia Infrastructure Fund Facility (IIFF), which could take place as early as March. 

This institution will be charged with raising funds to finance infrastructure projects under the public private partnership mechanism.

Key projects ready to start as early as next month

Aditya Suharmoko, THE JAKARTA POST, JAKARTA | Sat, 02/21/2009 9:57 AM  

The government says infrastructure projects will be started as early as March to stimulate the economy amid the worsening global economic downturn. 

Finance Minister Sri Mulyani Indrawati said on Friday that ministries and government agencies had made preparations to start their new projects in March. 

“Based on the projects they’ve submitted, they’re ready to start implementing them in March.”

The government has included in its economic stimulus package Rp 10.2 trillion directly for the real sector, Rp 8.4 trillion of which is allocated to labor-intensive infrastructure projects. 

This amount is on top of over Rp 90 trillion already set aside in the 2009 state budget for infrastructure projects  under the auspices of various relevant ministries. 

Bambang Susantono, the deputy to  the Coordinating Minister for the Economy in charge of infrastructure, said the Rp 8.4 trillion of funds would be adequate to help cover important infrastructure projects. 

“The spread is good enough in terms of spatial coverage, areas, sectors. There are funds for trains, roads, ports and airports,” he said. 

The government has said there are 13 sectors whose infrastructure will be boosted this year to help mitigate the impact of the global economic slowdown. 

These include  multi-year project contracts covering roads, power plants and electrical transmission, airports, markets, trains, railways and ports, as well as handling disasters and developing low-cost apartments, village roads, irrigation schemes, fishermens’ houses and drinking water supply schemes. 

The start up of government-led infrastructure projects will be a major factor determining whether the economy can reach a full-year growth rate of between 4 and 5 percent this year, as forecast. 

Analysts have said the economy is bracing for the blows from the worst impacts of the global slowdown in the second half of the year. 

If the government is late in stimulating the economy, the economy may experience negative growth in the third quarter, said Purbaya Yudhi Sadewa, the chief researcher of Danareksa Research Institute. 

The government has created the Indonesia Infrastructure Fund Facility (IIFF) to help mobilize more funds to finance infrastructure projects in Indonesia. 

The Asian Development Bank has said it will inject Rp 1 trillion in funds to the IIFF out of Rp 4 trillion needed by the government. 

The government has said the Infrastructure Fund may be up and running by as early as March

Bambang said the World Bank and German development bank KfW had expressed interest to also support the IIFF. 

“We’re expecting additional funds of Rp 3 trillion to bring the capital (of IIFF) up to Rp 4 trillion this year,” he said. 

He added that the Finance Ministry had prepared the board of commissioners and directors of IIFF. 

“The selected people have said if they are chosen, they’ll expand the capital to Rp 20 trillion in the next five years,” said Bambang. 

The government expects the IIFF to provide equity and to finance infrastructure projects under the tried and practiced public-private partnership (PPP) mechanism.