17 February 2020 (closed)
USD/IDR (13,777) +42.00 +0.31%
EUR/IDR (14,865) +32.28 +0.22%
Jakarta Composite Index (5,867.52) +0.58 +0.01%
Indonesia's Chamber of Commerce and Industry (Kadin) said that it signals a lot of foreign interest in infrastructure projects in Indonesia. However, the country's unconducive investment climate blocks investors from initiating or participating in these projects. A number of matters that cause the unconducive investment climate are discrepancies in regulatory framework between central and regional governments, land acquisition, and a lack of human resources with adequate skills.
These issues affect project viability in Indonesia and thus causes investors to refrain from investing. Weak regulatory coordination between the central and regional governments of Indonesia is the consequence of the decentralization process that Indonesia has experienced since the fall of the Suharto regime in 1998. However, more autonomy has also resulted in more chaos and conflicts regarding investment projects. According to a high Kadin official, local governments may be more enthusiastic and conducive to infrastructure projects within their territories if these governments can participate in the project (for example by becoming a stakeholder).
The problem of land acquisition has been a major problem for infrastructure projects in the current Reformation period. In order to free land for projects, a long process is needed. Moreover, settling land prices is difficult as high prices are demanded by locals. This means that sometimes national interests (for example an important toll road) are subordinate to local interests. Local people are hesitant to sell their land as they firmly believe that such a transaction will not be good for them while another party or parties profit disproportionately from it.
At end 2011, the Indonesian government and parliament approved the new Land Acquisition Law (UU No. 2/ 2012) that is regarded to speed up the land acquisition process notably as it deals with the revocation of land rights to serve public interest, puts time limits on each procedural phase and ensures safeguards for land-right holders. The bill, confirmed by the signing of a presidential regulation by president Yudhoyono in August 2012, was implemented in 2012 and protects both government projects and public-private partnerships (PPPs). In the latter, the private sector is expected to finance about 70 percent of the investments. However, the new law has not shown any satisfying results yet.