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President Susilo Bambang Yu-dhoyono held separate meetings with fiscal and industry high-ranking officials on Friday over the need to eliminate policy confusion in infrastructure development to achieve higher economic growth.
Among the contentious issues needed to be immediately settled, Yudhoyono said, was confusion centering on the construction of the ambitious US$10 billion Sunda Strait Bridge (SSB) that will link Java and Sumatra.
The confusion, according to several ministers, has triggered irreconcilable rifts between Yudhoyono’s economic ministers over the project’s legal uncertainties and the preferential treatment given to a consortium led by the politically wired Tomy Winata.
During a press conference at the Finance Ministry, Yudhoyono acknowledged different interpretations among his ministers over a presidential decree on the development of the bridge. “I have been hearing of differences in interpretations of the decree. Therefore, I am currently waiting for the report on the issue from related ministers, such as from the Coordinating Economic Minister and the Public Works Minister,” Yudhoyono said.
“Will I be willing to revise the decree? Well, I have to see whether there is a flaw, or whether we need to make it clearer. A decree can be revised at any time,” he added.
Yudhoyono said the decision to revise the decree would depend on the final recommendation currently being arranged by a team consisting of several ministers.
According to Coordinating Economic Minister Hatta Rajasa, the team had completed its review, and would soon report its recommendations. “I will announce the recommendations made by the team on the decree on Monday,” he said.
The decree, issued late last year, has resulted in confusion due to several legal flaws, such as on the legal status of the project.
Apparently aware of the future risks the project posed to the state budget and legal uncertainties for the engaged private sector, Finance Minister Agus Martowardojo insisted on revising the decree and urged all stakeholders to comply with the rule of law.
However, his proposal was not greeted warmly by fellow ministers, particularly Hatta.
Analysts have warned a failure to address the problem would send a bad signal to foreign investors, who were willing to participate in the country’s infrastructure development under the public-private partnership (PPP) scheme.
Several ambitious PPP projects have run aground due to legal uncertainties.
Yudhoyono emphasized the need to create a conducive environment for the much-needed development of infrastructure in order for the economy to expand.
“At this point, we should be aggressive in luring investors in the infrastructure sector. We should ask them to cooperate in projects that are commercial,” he said.
According to analysts, poor infrastructure has undermined Indonesia’s potential to grow by more than 7 percent annually.
Logistic trucks from Java, for example, have to wait for days just to cross to Sumatra with ferries, creating not only a high-cost economy but also business uncertainty.
Aside from infrastructure, Yudhoyono also acknowledged that more should be done to end policy confusion between the central and local governments. “Sometimes, the procedures of doing business at the central level is good but then the process stops when it faces obstacles at local levels,” Yudhoyono added.
He cited an example of the newly passed 2012 Law on Land Procurement for the Development of Public Facilities, which turned out to be complex.
“The law provides certainty for investors when it comes to procuring land for some projects. At the same time, it also protects the interests of people living nearby,” Yudhoyono said. “But there are still some brokers at the local level who play around with the land to get some fees. I hope the implementation of the law can curb these kinds of practices.”
The newly appointed chairman of the Investment Coordinating Board (BKPM), Chatib Basri, said his agency had been working on schemes to ensure business certainty. “The focus is on efforts to synchronize policies between the central and local governments,” he said.
Failed PPP infrastructure projects
• The development of the Manggarai-Soekarno Hatta railway
Two bidding processes were conducted involving two participants, Mitsui and Railink. However, the tender process did not continue because a PPP regulation stipulated the need to have at least three participants for a tender to begin.
• The Jakarta Monorail
PT Jakarta Monorel stopped the development of the project just as soon as it started in 2004. Governor Fauzi Bowo finally decided to cancel the project altogether in 2011 due to legal uncertainties.
• Bojonegara seaport hub in Banten
Speculation is rife that political rifts and business competition are the main reasons for the cancellation. State port operator Pelindo II, however, said the project was stopped because the location was too far from main roads. The Banten provincial government instead planned to develop a gas station at the location.