New regulation expected to pave way for infrastructure development

New regulation expected to pave way for infrastructure development

Tol road project in Benoa, Bali. (ANTARA/Nyoman Budhiana)

"The total investment amounted to Rp490.7 trillion."
Jakarta (ANTARA News) - Problems in acquiring land for infrastructure projects have so far been regarded as the main stumbling block that has delayed the development of a number of toll roads, bridges, and railroads in Indonesia.

Based on the examples of other countries such as China, Indonesia has realised that infrastructure - such as roads and bridges that connect islands and cities - is crucial to help boost the country`s economic growth.

To this end, the government has outlined a Master Plan of Acceleration and Expansion of Indonesian Economic Development (MP3EI) aimed at strengthening the progress of economic development in Indonesia, with a particular focus on improving the connectivity between the country`s economic regions by developing the necessary infrastructure, which is the backbone of any economic activity.

Coordinating Minister for Economic Affairs Hatta Rajasa stated that the MP3EI in 2012 covers 89 projects in six economic corridors. These 89 projects comprise 39 infrastructure projects, with a total investment valued at Rp195.940 trillion, and 50 projects in the real sector, with an investment worth Rp294.787 trillion.

"The total investment amounted to Rp490.7 trillion, which has already been validated from Rp600 trillion in March 2012," he said.

According to the government`s data, the 39 infrastructure projects will comprise 12 projects in Sumatra, 17 in Java, four in Kalimantan, two in Sulawesi, three in Bali and Nusa Tenggara, and one Papua.

Meanwhile, the 50 projects in the real sector will consist of 14 projects in Sumatera, 19 in Java, four in Kalimantan, seven in Sulawesi, three in Bali and Nusa Tenggara, and three in Papua.

Minister Hatta, however, admitted that most of the MP3EI projects have been hampered by problems concerning land acquisition and other regulations.

Land acquisition problems usually include difficulty in reaching price agreement due to high demand from land owners, unclear land status certifications, public protests against toll road development in certain areas such as cemeteries, and the harassment of toll road investors by land middlemen or brokers.

To address the regulation-related problems, the government has set up a regulation working group which is currently working to improve 30 regulations, including laws as well as government, presidential and ministerial regulations.

Minister Hatta had earlier announced that a presidential regulation on land acquisition will be issued in late May to boost infrastructure development.

"We expect the regulation on land acquisition for public infrastructure development to be completed by this May to obtain optimal outcome," he declared after attending the MP3EI coordinating meeting at the Bappenas office in Jakarta on May 10, 2012.

The planned regulation will also address the problem concerning land brokers, as it will provide for direct negotiations with land owners.

"And the people will have the right to express their views," he affirmed, adding that the regulation will reduce brokering and provide justice to the people.

If they do not agree on the land prices, the owners can approach a court and thereafter appeal to a higher court, said the minister, giving assurance that the entire process would take only a month.

For the acquisition of land measuring more than one hectare, a special team will have to carry out a feasibility study to determine the appropriate prices. However, this mechanism will not apply to land measuring less than one hectare.

The ongoing discussion on the new presidential regulation involves various stakeholders, including the National Agrarian Agency (BPN).

"The infrastructure development could be almost 1.5 times that in 2011. And with the projects planned until the end of 2012, it could be double - a sharp increase," Hatta remarked on May 9.

Julian Aldrin Pasha, as spokesman for President Susilo Bambang Yudhoyono, recently confirmed that the presidential regulation is necessary for implementing Article 56 of Law No. 2/2012 on Land Acquisition for the Development of Public Facilities, which was passed by the House of Representatives (DPR) on December 16 and has been in effect from January 14, 2012.

The new regulation to be issued and signed by President Yudhoyono is expected to make it easier for the Indonesian government to acquire land for infrastructure projects.

The government plans to spend US$7 billion on infrastructure projects, including the construction of about 20,000 kilometres of new roads and the generation of 15,000 megawatts of energy by new power plants.

The lack of adequate infrastructure results in bottlenecks, hampering future growth opportunities, said Karsten Fuelster, the senior investment officer of the World Bank Group`s International Finance Corporation (IFC), recently.

IFC is allocating about US$200 million for investment in Indonesia`s infrastructure projects this fiscal year.

"We are committed to investing in infrastructure because the lack of infrastructure remains Indonesia`s greatest challenge to boosting its economic growth," remarked IFC`s communications officer Novita Patricia Wund in Jakarta recently.

IFC has predicted that the law - together with Indonesia`s recent credit rating upgrade, which makes fundraising cheaper - will help jump-start infrastructure investments this year.

While awaiting the new regulation, PT Marga Lingkar Jakarta (MLJ) President Director Sonhadji S recently announced that the construction of the Jakarta Outer Ring Road West 2 (JORR W2) toll road will most likely be delayed due to land acquisition problems.

"The target for settling the land provision issue in South and West Jakarta was December 2011, which was extended till April 2012. But, from January to April, only four out of 190 plots of land in South Jakarta have been cleared," he declared on May 9.

PT MLJ is the concession holder for the JORR W2 toll road, which will extend for 7.67 km from Kebun Jeruk to Ulujami. The total investment in the project amounts to Rp2.23 trillion, and its construction work began early this year. The road is expected to be operational by May 2013.

According to Sonhadji, the company should have been able to acquire 20 plots of land in West Jakarta in the above-mentioned period, but there has been no progress despite the availability of funds. The company has allocated a total of Rp610 billion for acquiring 42 ha of land, of which Rp400 billion has been spent.

"We think that they are affected by the planned presidential regulation on land acquisition, which is still being discussed at present," he remarked, referring to the delayed land acquisition process.

The JORR W2 toll road, which will connect the JORR W1 toll road of Kembangan in West Jakarta with Priok in North Jakarta, is expected to help reduce traffic jams in Jakarta by 30 percent and serve as an alternative route for goods transportation.