news focus: RI facing critical period in infrastructure development

Jakarta (ANTARA News) - The coming three years will be a very critical phase for Indonesia in the development of its infrastructure as it would only have two options, namely developing fast and strategic infrastructures or being trapped in structural and prolonged congestion.

The next three years until 2014 will be crucial for Indonesia`s infrastructure development. However, observers see that the government still has no solid policy in the field that would support the development of its infrastructures.

"The government`s latest policy in this sector such as a master plan for the acceleration and expansion of Indonesia`s economic development (MP3EI) has not yet been prepared well in the field," Suyono Dikun, a professor at the University of Indonesia, said on Thursday.

Failure to develop enough infrastructures in the country will cause congestion in different sectors, not only in the traffic one.

"The congestion will happen not only on roads but also on railway tracks, ports, airports, power energy, irrigation, drinking water and others," Suyono said.

He said that if Indonesia failed to develop more modern, efficient and quality infrastructure in the coming few years, it would lag far behind other nations.

Legislator Rhendy Lamadjido and expert staff of the ministry of public works Danang Parikesit shared Suyono`s view.

Suyono, who is also a former deputy to chief economic minister for infrastructure pointed out that institutionally the government had basically tried to do its best to develop infrastructures such as through the Policy Committee for the Acceleration of Infrastructure Development Preparations (KKPPI) and the issuance of various presidential regulations such as Presidential Regulation No. 81/2003, Presidential regulation no. 42/2005 and No. 12 / 2011.

"Presidential Regulation No. 13/2010 on Public Private Partnership (PPP) has also been revised with presidential Regulation No. 56/2011, yet the long efforts made in the span of 10 years have not yielded an encouraging result," he said.

Sharing Suyono`s view was legislator Rhendy Lamadjito of the House Commission V on public works affairs. He said that Indonesia`s infrastructure development was now entering a critical period.

Rhendy said that so far there was something wrong with the budget policy on infrastructure. He cited as an example tenders for infrastructure projects. Tenders were called in June-July while their contracts were signed in August, only after which could the budget be disbursed.

"To make this more complicated difficult is the fact that there were post-fasting month and Christmas activities, while at the same time the budget year and disbursement were limited to the year-end," he said.

As a result according to Rhendy who is also chairman of the National Construction Services Development Institute, it is quite understandable if the absorption of public works budget in the infrastructure sector only reached 50.8 percent, leaving about 1,500 more infrastructure projects in the ministry not implemented.

"Players in the field also face a problem of interest rate where they need soft interest policy so that it is urgent in this respect for the government to consider establishing a construction bank," Rhendy said.

The situation was also worsened by new policies issued to accelerate infrastructure development such as the Public-Private Partnership (PPP) and the Master Plan for Acceleration and Expansion of Indonesia`s Economic Development (MP3EI). It turned out that these policies had no strong legal basis such as law. "This is why it is difficult for foreign and domestic investors to enter infrastructure projects," he said.

Rhendy said that the other important thing was the fact that many legal products and other regulations had been issued but the government was inconsistent in its implementation, such Law No. 18/1999 on construction Services.

Expert Staff of the Public Works Minister, Danang Parikesit said that what the government expected in issuing a number of polices such as the PPP and MP3EI could not yet be realized as the scems could not be implemented in the field.

"Initially in November 2009 the MP3EI was only an idea, along with the idea of economic corridors, yet in May-June this year it was decided as a policy that has to be carried out while the instruments and strategies for its implementation in the field not yet existed. Only now does the government formulate it," Danang said.

Therefore, the government needs to stress the MP3E and PPP, whether they are merely re-branding or they are needed to boost development. "If they are only for re-branding, there is no need to support them with a law," he said.

Regarding the critical situation in the coming three years, Danang said it was in the context of comparing it with other countries."Yet, in the real sense, the Indonesian infrastructure is basically growing," Danang said.

In term of infrastructure development financing where the state budget is expected to provide 30 percent while the private sector is expected to contribute 70 percent, Danang said that if the 30 percent financing is carried out in the right way and transparently, the private sector would contribute the70 percent easily.

Some time ago, an estimate made by the Indonesian Chamber of Commerce and Industry (Kadin) showed that Indonesia will need Rp2,855 - Rp2,910 trillion to finance its infrastructure development in the 2010 - 2014 period.

The government since recent years has the commitment to stimulating investment in infrastructure development in order to boost economic growth to about 6-7 percent by 2014.

The government hopes for a total investment of Rp2,000 trillion while actually it will have an investment of about Rp1,600 trillion in the next five years in order to achieve the growth target.

Owing to the big investment needed to develop infrastructure, the government has to promote its infrastructure development to the private sector as it could only finance 30 percent of the total funds needed for the projects.

About 70 percent of the infrastructure projects are expected to be financed by private companies, among others through a private public placement (PPP) scheme. (*)

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