T

he newly revamped State Asset Management Agency (LMAN) is getting down to business by acquiring land for priority infrastructure projects, realizing a promise the government has made to ensure smooth development.

The public agency has prepared two funding schemes for land acquisition.

Under the first scheme, called direct funding, the LMAN disburses funds as compensation for parties whose land has been acquired, while under the second scheme, indirect funding, the agency provides funds to contractors acquiring land.

The LMAN’s first major task since its appointment as “land financier” early this year occurred on Tuesday, when it signed a memorandum of understanding (MoU) for the indirect funding scheme.

The MoU involved the Toll Road Regulatory Agency (BPJT), the Public Works and Public Housing Ministry and 23 companies holding toll road business permits.

Among the 23 companies are state-owned construction firm PT Hutama Karya and PT Jasamarga Manado Bitung, a subsidiary of state-owned toll road operator PT Jasa Marga, which is responsible for the Manado-Bitung toll road project in North Sulawesi.

No details were immediately available regarding the funding needs of the 23 companies.

The LMAN has previously disbursed funds under the direct funding scheme, but in small amounts compared to the combined Rp 36 trillion (US$2.7 billion) of capital expenditure funds it secured through state capital injections under the 2016 and 2017 state budgets.

The agency was created in 2015 and was originally tasked with managing state assets under the supervision of the Finance Ministry. At the time, it solely sought return on investments.

However, as land issues often hamper development projects in the country, the government and lawmakers decided to assign the LMAN to facilitate businesses and land owners in the land acquisition process laid out in Law No. 2/2012.

The law stipulates a maximum of 583 days for the entire land procurement process, with deadlines set for each step on the way.

“Infrastructure development is vulnerable to delays. I’ll ask the LMAN to study and solve the [land acquisition] issue and share its knowledge [with stakeholders],” Finance Minister Sri Mulyani Indrawati said in her speech during the signing of the MoU.

LMAN president director Rahayu Puspasari said the agency had requested another capital injection of Rp 15 trillion to support its operations, either under the soon-to-be-revised 2017 state budget or the 2018 budget.

The additional funding need is based on calculations by the Toll Road Operator Company (BUJT), which has found that toll road work will require Rp 28 trillion this year alone.

The LMAN argues that the extra funds are also needed to cover projects besides toll road, especially with the addition of 44 fresh projects to the existing 225 national priority projects listed under the supervision of the Committee for Acceleration of Priority Infrastructure Delivery (KPPIP). The 225 priority projects span 13 sectors and include the 35 gigawatt electricity program.

The 44 additional projects are taken from 117 projects proposed by different ministries and are set to kick off in 2018 and 2019.

At the top of the priority list is the development of 2,600 kilometers of new roads and 49 new dams and power plants.

Each project has an investment value of more than Rp 500 billion; together they are estimated to cost Rp 819.4 trillion.

Mirae Asset Sekuritas analyst Franky Rivan wrote in a research note that with Rp 137 trillion in spending cuts in the revised 2016 state budget, several infrastructure projects risked facing bottlenecks in the near term.

Moreover, state participation in infrastructure funding may slow down until mid-2017.

“Against this backdrop, the private sector is moving onto our radar, as we believe it is likely to pick up the slack for the government in terms of financing current projects,” he wrote.