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Jakarta Post

Priority projects remain in doldrums

  • Ina Parlina and Dewanti A. Wardhani

    The Jakarta Post

Jakarta   /   Tue, June 7, 2016   /  06:00 am
Priority projects remain in doldrums Trucks and heavy equipment are in operation at an infrastructure project in Indonesia. President Joko “Jokowi” Widodo has pledged to focus on infrastructure development in his five-year term as president, boosting share prices of infrastructure-related firms. (Tempo/-)

Hundreds of the government’s priority infrastructure projects are on the brink of failure, having failed to show any progress in six months.

Early this year, President Joko “Jokowi” Widodo issued two legal bases to expedite 225 projects listed as “national strategic projects” and a mega power plant project.

They comprise 225 projects in 13 sectors, such as railways and toll roads, and receive special backing and attention from the government, as stipulated by presidential regulations (Perpes) No. 3/2016 and No. 4/2016.

The government is hoping to see the regulations ease transportation and the distribution of goods and create new jobs to eventually spur economic growth.

However, only 86 prioritized infrastructure projects have commenced, while the remaining 139 projects are still at the planning stage. The number of projects that have started is equal to just a third of the total.

Experts say that the lack of progress after six months is worrisome, as the government should have commenced at least half of the 225 infrastructure projects if they are to be completed on schedule by 2025.

Center of Reform in Economics (CORE) Indonesia research director Mohammad Faisal said on Monday that with just 86 projects begun, the program was progressing at a snail’s pace. He attributed the halting progress to the government’s slow implementation of new schemes and incentives.

Land acquisition, for instance, remains the biggest obstacle to infrastructure projects, but the government has still yet to implement its planned incentives to speed up the time-consuming land acquisition process.

Indonesian Institute of Sciences economist Latif Adam said many of the projects’ plans were largely unclear, thus discouraging companies to participate in a public-private partnership (PPP) scheme.

“In many projects, the government only provides details of financing without a proper feasibility study, so it’s still very raw. Companies need more than just financing details,” Latif said over the phone on Monday.

Financing issues have been identified as a major challenge in many projects, leading the government to seek external financing under various schemes.

For example, the government has secured Rp 4.3 trillion (US$319.04 million) in loans from China’s Exim Bank for the construction of the Cileunyi-Sumedang-Dawuan (Cisumdawu) toll road in West Java and the Manado-Bitung toll road in North Sulawesi. However, the loans have yet to be disbursed.

The cash-strapped government is also encouraging firms to procure land using their own funds first and be compensated by a public service agency (BLU) under the Public Works and Public Housing Ministry; the BLU, however, has yet to see the light of day.

Meanwhile, during a limited Cabinet on Monday, Jokowi instructed his ministers to focus on ensuring the future of the 225 projects.

He instructed the Office of the Coordinating Economic Minister, the National Development Planning Board (Bappenas) and the Presidential Office to monitor the projects in “a real-time manner” to allow them to identify any potential obstacles, including those related to funding and land procurement.

The government will draft financial schemes and conduct feasibility studies for those projects listed as national strategic projects, as such studies were absent from 139 projects, according to Coordinating Economic Minister Darmin Nasution.

“The President said it was important to immediately determine the kind of financing scheme [suitable for these projects],” Darmin said after the meeting.

He added that his office would revise the existing priority project list and submit a follow-up report in late July.

Several government's priority projects(Presidential Regulation/.)