Indonesian contractors involved in the development of infrastructure projects that have been declared 'national strategic projects' still see difficulty in realization of these projects despite the implementation of Presidential Instruction No. 1/2016 on the Acceleration of the Implementation of National Strategic Projects, signed on 8 January 2016 by Indonesian President Joko Widodo. This presidential instruction orders all relevant ministries and institutions to support the acceleration of the country's national strategic projects. By 2019 these projects - 225 in total - have to be completed.
Tri Agus Arianto, Director at Citra Waspphutowa (the company that holds the concession for the 21.5 kilometer-long Antasari-Depok-Bogor toll road in West Java), said the land acquisition process for these national strategic projects need to be finalized in early 2017 given that these projects need to be completed by 2019. Although Indonesia's Land Acquisition Law (Law No. 2/2012) has borne fruit by speeding up the land acquisition process (as this law deals with the revocation of land rights to serve public interests, puts time limits on each procedural phase and ensures safeguards for land-right holders), Arianto says disbursement of the government's land procurement budget remains a problem and causes the delay of some projects. He added, however, that 10 percent of the land needed for the Antasari-Depok toll road still needs to be acquired.
Suradi Wongso, company secretary at Wijaya Karya, said government support for land acquisition and all permit arrangements related to projects that are labelled 'national strategic projects' has helped to speed up procedures. Wongso does not share Arianto's experience that the government is late in disbursing funds from its land procurement budget. However, he does not deny that several government regulations still obstruct the progress of construction. For example, construction of the Jatiluhur water supply system in West Java has been delayed until the second half of 2016 (initially construction was scheduled to start in early 2016) as not all license procedures have been completed. This issue is related to the decision of the Indonesian Constitutional Court (in February 2015) to annul Water Resources Law No. 7/2004 on grounds that it was unconstitutional. The court reinstated Water Law No. 11/1974. This 2004 law was scrapped as it had encouraged privatization and commercialization of Indonesian water resources at the expense of the people’s rights to water (regarded a breach of Article 33 of the 1945 Constitution). The cancellation of the 2004 law dented investor confidence in the Indonesian water industry, and stalled potential public-private partnership deals.
Meanwhile, Indonesian Finance Minister Bambang Brodjonegoro said government capital expenditure on infrastructure development (from the 2016 State Budget) stood at IDR 1.5 trillion (approx. USD $100 million) in January 2016, thus by far outperforming government spending on infrastructure development in the same month last year (at IDR 100 billion only). This would mean that public spending on infrastructure has actually improved significantly. This is a very positive development as - traditionally - government spending starts to rise toward the end of the year due to bureaucracy and land acquisition trouble. Infrastructure project execution and the full enforcement of deregulation policies should be the main triggers for Indonesia's economic growth in 2016. The government of Indonesia targets to spend IDR 360 trillion (approx. USD $26.5 billion) on infrastructure development across the country in the 2016 State Budget.
Indonesia's 225 National Strategic Projects:
|Railways in City||7|
|New Airport Development||4|
|Other Strategic Airport Programs||2|
|One Million Houses Program||3|
|Border Crossing Posts||7|
|Science & technology||1|
|Priority Industrial Areas
(Special Economic Zones)
|Agriculture & Fisheries||3|
Source: Bisnis Indonesia