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Indonesia Government Rolls Out Red Carpet for Investors

Indonesia Government Rolls out Red Carpet for Investors by Fabiola Desy Unidjaja and Zakki P. Hakim, The Jakarta Post President Susilo Bambang Yudhoyono promised foreign investors on Monday a much better investment climate as the government aims to lure a whopping US$120 billion in new investment for the development of roads, power plants and other crucial infrastructure facilities over the next five years. He said the government planned a "new partnership" that would help ensure legal certainty for investors and aimed to eliminate distortions to investment and economic activities through improved tax and fiscal policies, an efficient and effective administration and higher economic competitiveness. "We'll eliminate obstructions that have impeded investment and economic activities," Susilo said at the opening of the two-day Infrastructure Summit, which nearly 600 domestic and foreign investors attended. He explained that the lack of infrastructure in the country -- as a result of years of neglect since the 1997 regional economic crisis -- had led to, among other things, long traffic jams, power outages and bottlenecks at seaports, all of which hampered economic activities and increased the cost of doing business here. The government has said it would need around $145 billion for the development of various infrastructure facilities on top of $4 billion for infrastructure in tsunami-ravaged Aceh. Some $25 billion, or 17 percent of the funding needed, is expected to come from the state budget; $30 billion from domestic finance institutions; $10 billion from foreign donors; and the $80 billion bulk from private and foreign investors. During the investment forum, the government offered 91 infrastructure projects worth $22.5 billion to foreign and domestic investors. The government will start the bidding process in February. Coordinating Minister for the Economy Aburizal Bakrie said the next batch of infrastructure projects worth $57.5 billion would be offered in November. He previously said that investment in the infrastructure sector would generate a healthy investment return of between 15 and 23 percent. Fixing the infrastructure sector is crucial to help the country enjoy higher economic growth of at least 6 percent per year, the minimum growth level needed to help resolve the chronic unemployment problem. The largest Southeast Asian economy has been growing at an average of around 4 percent over past years as investors have been reluctant to pour in new money due to a variety of reasons, including legal uncertainty, security concerns, corruption and the threat of terrorism. Susilo said the country's failure to rebound from the 1997 financial crisis was partly due to its poor infrastructure, which discouraged badly needed new investment. Some 45 percent of households in Indonesia have no electricity. The country also has the lowest telephone access rate in the Asian region, with only four out of 100 Indonesians having ready access to telephones. Meanwhile, Dutch water company Waterleidingmaatschappij Drenthe director KJ Hoogsteen told The Jakarta Post that the government's presentation was quite promising, although he would need to see how the policies promised would be implemented. "I'm looking forward to seeing how will it fix the legal framework in the water supply sector, as many of the regulations contradict each other," he said on the sidelines of the summit. Foreign players in the water supply sector have complained of legal uncertainty as bylaws issued by local administrations often contradict central government rulings.