Indonesia making progress on infrastructure reforms
Manila, Philippines – Indonesia is moving in the right direction in instituting reforms that will create a climate for growth in infrastructure investments, ADB Vice-President C. Lawrence Greenwood, Jr. told a conference audience in Jakarta 2006-11-01.
Over the last year, in particular, Indonesia has built considerable momentum for infrastructure reform, Mr. Greenwood told the Infrastructure Conference and Exhibition, hosted by the Government of Indonesia.
"Although it will not be easy, I am convinced that with steady effort, the Government can remove the remaining impediments to investment in infrastructure needed to build a firm foundation for sustainable, higher economic growth and poverty reduction," he said.
"Investing in decent roads, water supplies, energy, telecommunications and other basic infrastructure services is vital to sustain economic growth and improve people’s standards of living."
Indonesia’s infrastructure requirements are daunting, the Vice-President pointed out, amounting to $70 billion over the next 5 years.
Since the Asian financial crisis of the late 1990s, public spending has dropped while private investment virtually halted due to weaknesses in the investment climate.
In response, the Government has undertaken a series of major policy, institutional, and regulatory reforms. Through such actions, the Government aims to boost public spending and stimulate private investment principally through a new framework for public-private partnerships (PPPs).
"PPP can only work when the public and private sectors play on the same field, as equal partners," Mr. Greenwood said. "Both the spirit and practice of collaboration are essential to provide infrastructure services efficiently, and at the least cost to consumers."
Among the basic problems facing private investors in Indonesia – and Asia as a whole – is the lack of good quality information on projects, Mr. Greenwood said.
Also, increased private infrastructure investment will require significant strengthening of capacities in government agencies and state-owned enterprises tasked with project preparation, tendering, negotiation, and implementation oversight.
He added that it is also essential that the design, execution, and operations of projects are carried out in as fair and open manner as possible, so that the results will be accepted by consumers, civil society, and private industry alike.
"The major challenge facing the Government is to create an overall enabling environment that assures investors of predictability, a level playing field, low transaction costs, and fair rates of return," he said.
"This will require reforms to allow increase competition; credible and independent regulatory oversight; clear rules and regulations for the solicitation and evaluation of infrastructure project proposals; tariff regimes based on cost recovery; and efficient mechanisms for dispute resolution."
ADB remains fully committed to supporting the Government in its progress, the Vice-President stressed. ADB has provided more than $20 billion in cumulative development assistance, with close to $7 billion going to infrastructure.
"We at the Asian Development Bank are proud to be partners in Indonesia’s development efforts," Mr. Greenwood said. "Our big advantage as a development partner is the ability of our public and private sector operations to work closely together to design and implement quality infrastructure projects that meet the needs of both sectors."