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March 6, 2009

Infrastructure projects ready to roll

State-funded projects will begin construction within the next two weeks, kickstarting this year's massive infrastructure program, a minister says.

The projects will be financed by the 12.2 trillion rupiah fund for infrastructure, as part of the 73.3 trillion rupiah set aside by the government under its stimulus package to help cushion the impacts of the global economic crisis.

"Ministries, which are implementing these projects, will hand in their documents to the Finance Ministry on March 11, and the projects can be started at the latest March 18," Finance Minister Sri Mulyani Indrawati told a media conference Thursday.

Mulyani said the effect of the infrastructure stimulus should be felt at the latest in June. "The impact of physical projects are usually felt within two months. So, in May or June we should feel it."

The National Development Planning Agency (Bappenas) will oversee the implementation of the projects funded by the stimulus. "Ministries that fail to absorb the funds will get their allocation cut in next year's budget," she said.

Public Works Minister Djoko Kirmanto, whose ministry received a large part of the stimulus, said the project tenders were "almost settled", meaning tender results were coming in and work could start soon.

The 12.2 trillion rupiah fund will come on top of around a massive 150 trillion rupiah to be spent on infrastructure projects this year, two thirds of which is due  to come from the state budget and the rest from the state enterprises.

Infrastructure development is highly crucial for Indonesia's economy, especially with exports down. These government-led infrastructure projects will be a major factor propeling the economy to reach 4.5 percent economic growth this year.

However, while the financing for state-approved projects has been largely secured, the country will still have difficulties attracting the participation of the private sector in the longer term, unless it can provide incentives such as guarantees on infrastructure projects, said experts at a conference on Thursday.

Asian Development Bank (ADB) principal infrastructure specialist Bob A. Finlayson said the current global economic crisis had increased the uncertainties for investors.

"There's still a lot amount of money out there, but people aren't going to take decisions quickly. It's possible they will disburse funds to selective good projects," he said.

According to  Bappenas, between 2010 and 2014 the country will need a gigantic 1,429 trillion rupiah of funds for infrastructure projects. But the government could only provide about 31 percent, or 451 trillion rupiah, with the rest to be funded through public-private partnerships.
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