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Indonesia seeking US$12 billion for infrastructure projects JAKARTA - Indonesia Indonesia will seek US$12 billion (9.4 billion) in private capital to fund infrastructure projects at a conference that kicks off Wednesday, but it faces challenges overcoming an image of corruption that may scare off investors. Topping the list of deals on offer are the construction of a US$1.5 billion (1.2 billion) fiber optic network and two coal-fired power plants worth nearly US$2.48 billion (1.9 billion), said Conference Chairman Chris Kanter.

Smaller projects to build ports, toll roads and water processing facilities will also be open for bidding by 1,060 participants at the Indonesia Infrastructure Conference and Exhibition 2006 that wraps up Friday. Participants include 400 domestic entities, 460 foreign, and 200 representing government. Among them are 350 big name businesses from 30 countries, such as German engineering conglomerate Siemens AG, IBM Corp. and the Islamic Development Bank.

Organizers hope the meeting, seen as an important gauge for the government's ability to revitalize weak private investment, will go better than a similar conference in January 2005 that largely flopped due to a lack of government assurances, along with a thicket of regulatory and legal obstacles. The government awarded tenders for only seven projects out of 91 unveiled last year. Several projects will be re-offered this time around.

The success of the conference delayed by several months due to planning difficulties hinges largely on overcoming deep concerns about the feasibility of long-term projects in a country rampant with corruption at all levels of business and government. It is the legacy of former Indonesian dictator Suharto, whose family and cronies are widely blamed for draining the nation's vast resources for self enrichment until his downfall in 1998 amid the devastating Asian financial crisis.

Indonesia's underdeveloped roads, ports, power plants and waterways among the worst in Asia are a major impediment to further economic growth, which the country desperately needs to create jobs and reduce poverty. The Asian Development Bank said Tuesday it will invest US$1 billion in Indonesian infrastructure over the next four years to reinvigorate a funding system on the verge of collapse.

The majority of delegates are private sector investors who will consider around 50 contracts worth more than US$12 billion, with the 10 biggest projects accounting for a third of that, Kanter said. But DBS Bank economist Lim Su Sian told Dow Jones Newswires that foreign businesses would be looking for reassurances from government officials of their ability to push through badly needed legal reforms. Past promises have never materialized, he noted.

In effort to create trust at the conference, foreign investors will be given direct access to a panel of government leaders who will answer questions about transparency, bidding procedures and corruption. "They will provide risk guarantees ... this is showing that the government is committing themselves to being really open," Kanter said. "They will be measured by their success in finding funding for the projects."

Indonesian President Susilo Bambang Yudhoyono's vows to tackle corruption helped him into office in 2004. Several high-level official have since been prosecuted, but analysts say key institutional reforms must be made to root out common practices of kickbacks, bribes and embezzlement of public funds.



Posted in Economy @ 31 October 2006 13:42 CET by Jeroen · 'Blog' RSS feed · permalink






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