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NEWS UPDATES 15 September 2009

Indonesia adds incentives to $1.5bn railway project

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The Indonesian government will award a competitive pricing scheme as an incentive to lure investors in a $1.5 billion, 185 km-coal railway project in Central Kalimantan, in addition to a 30-year concession right, the Jakarta Post reported.

Bambang Susantono, a deputy for infrastructure and regional development at the Coordinating Ministry for Economic Affairs, said on Sunday that the government was hopeful the project — which could be put into a tender by early next year — would draw interest from investors with the numerous incentives it planned to provide.

In addition to the long concession and the guarantees regarding land acquisition, the government will also offer competitive pricing to provide investors with business certainty.

“There will be a pricing formula, to be determined later on, to ensure certainty for investors throughout the 30-year concession period,” Bambang said in interview.

On Friday, the Central Kalimantan provincial administration started sounding out interest in the projects, which will link Puruk Cahu and Bangkuang, by inviting investors from domestic and overseas markets, as well as embassy representatives.

“The project is expected to finish by 2012,” Central Kalimantan Governor Agustin Teras Narang told reporters Friday, adding that the government was now also trying buy the land for the project, as the feasibility studies had been completed earlier this month.

Data from the provincial administration shows that 70 percent of the 16-million-square-meter land to be acquired is state-owned.

Therefore, only 30 percent of the land belongs to the residents, Agustin said. He added that acquiring the land would not be a big problem, as population density in the area was low. The provincial government may even provide settlements for the relocated people, Agustin said.

He said the project scope included land acquisition, the construction of a single railway track between Puruk Cahu and Bangkuan (including civil construction, bridge signaling and facility works), as well as the construction of stations, workshops and depots, along with coal loading and unloading facilities.

Data shows the project will affect 24 coal miners whose production capacity is between 300,000 tons and 5 million tons per year.

The railway will be capable of transporting 10 million tons of coal per year, and 20 million tons after the first 10 years, Agustin said.


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