Workers hard at work in a section of the Trans Java toll road near Jombang, East Java. (Antara Photo/Syaiful Arif)

Govt Now Allows SOEs, Private Sectors to Finance Land Acquisitions


DECEMBER 22, 2016

Jakarta. President Joko "Jokowi" Widodo has signed a new presidential regulation on Wednesday (22/12) that will allow state-owned enterprises and private companies to pay for land acquisition in some priority projects, in a move to accelerate infrastructure development in Indonesia.

Land acquisition for government projects is supposed to be the responsibility of central and regional governments but they are often constrained by the existing state and regional budgets, delaying the completion of the projects.


For example, the government only allocated Rp 2.8 trillion ($207 million) for land acquisition on toll road projects in the state budget this year when a total of Rp 17 trillion is actually needed.

With the new regulation in place, the president hopes SOEs and private companies can bear the upfront cost until the government comes up with sufficient funds to pay them back.

"The government will give a guarantee against risk that may arise from the delayed budgeting process," Bastari Panji Indra, the deputy assistant for housing, land and infrastructure financing at the Coordinating Ministry for Economic Affairs, said on Wednesday.

The financing scheme, however, will only apply to 225 strategic projects that the government identified in January this year as well as all power plant constructions under its so-called 35,000-megawatt electricity grid program.

The strategic projects include the Jakarta-Bandung high speed train, sections of the Trans Java toll road, Labuan Bajo airport expansion in East Nusa Tenggara, Iran and Pertamina's Bontang refinery project and a new sewage system in Jakarta.

Next year, the government has set aside a land acquisition fund of around Rp 20 trillion through the Asset Management Agency in the 2017 state budget.

Private companies are expected to invest up to Rp 1,700 trillion in infrastructure projects between 2014 to 2019, but they have only put in about Rp 110 trillion so far, Bambang Brodjonegoro, the head of Bappenas, the National Development Planning Agency, said.