Airport and toll road become priorities in 2012

JAKARTA: Ministry of National Development Planning reveals the priorities in infrastructure construction next year, which is included in Indonesia’s Master Plan of Economic Development Expansion Acceleration (MP3EI).

The priority of infrastructure development will be focused on MP3EI projects and Metropolitan Priority Area (MPA), said Dedy Supriadi Priatna, Deputy of Facility and Infrastructure at Ministry of National Development Planning (Bappenas).

The projects include expansion of Tanjung Priok Port with investment of US$1.17 billion and expansion of Soekarno-Hatta Airport. The airport expansion features modification of terminal and taxiway, Dedy said.

In addition, the priority include some toll road projects, including Serangan-Tanjung Benoa toll road in Bali with investment US$196.1 million and Pasir Koja-Soreang toll road in West Java with investment of US$143.5 million.

There is also Bandung Intra Toll Road, which will be constructed inside the capital of West Java Province, with investment of US$800 million. Another toll road will connect Cileunyo-Sumedang-Dawuan in West Java with investment of US$1.01 billion.

The first groundbreaking of Cileunyi-Sumedang-Dawuan (Cisumdawu) will take place in January 2012, building 6.35-kilometer road with investment of IDR1.02 trillion.

The groundbreaking may start after the signing of construction agreement on Dec 1 between Directorate General of Road Construction at Ministry of Public Works and the winning contractor consortium, consisting Shanghai Corporation Construction Group, PT Waskita Karya and PT Wijaya Karya.

At the signing ceremony, Director General of Road Construction at Ministry of Public Works Djoko Murjanto said that the start of construction in the Rancakalong-Sumedang section would be completed to increase the project feasibility to 17%.

The feasibility is crucial, as a bidding will be taken to find investor for the project under a public private partnership. Part of the construction uses funding from 2012 State Budget and loans from China.

In the meantime, Binjai-Medan-Kuala Namu-Tebing Tinggi toll road will start construction with investment of US$790.8 million. According to data of MP3EI projects, the 16.91-kilometer road from Medan to Kuala Namu will get funding from China as much as IDR1.22 trillion. The signing of the contract took place on December 12.

In Kalimantan, three main construction project priorities are Malory International Harbor in East Kalimantan with US$1.78 billion investment value, extension of Tjilik Riwut Airport in Central Kalimantan US$11.3 million and Tayang Bridge in West Kalimantan IDR740 billion.

The construction of two special economic zones, Sei Mangke in South Sumatera and Tanjung Lesung in Banten, Dedy continued, also become government main focuses. According to MP3EI project data, SEI Mangke needs IDR334 billion while the construction of industrial zone needs IDR2.50 trillion.

Tourism spot Mandalika in Lombok, West Nusa Tenggara will also become new economic zone in 2012. The development requires IDR829 billion to construct infrastructure, public facilities, hotels, villas, residential areas and golf field.

Airport and toll road become priorities in 2012 – Bisnis.com.

Finance Ministry urged to issue regulation on MP3EI gap fund

JAKARTA : The Ministry of Finance is urged to immediately issue regulation on viability gap fund by the end of the year, to speed up the construction of five nation-scale project in 2012. “This regulation must be issued in the end of December to speed up those projects. Otherwise, there will be another delay,” Dedy Supriadi Priatna, a Deputy Minister of National Development Planning Agency, this week end. Some of the projects, under the acceleration and expansion of economic development masterplan MP3EI, are Lampung water supply worth US$50 million and Umbulan project US$300 million–US$500 million in Pasuruan, East Java. Next, Dedy who is in charge on infrastructure and utilities said Maros project US$50 million, railway infrastructure in Central Borneo US$1,5 billion–US$3 billion, and Ampo terminal US$50 million. Such regulation will allow private investors to obtain viability gap fund VGF in cash after the construction phase on infrastructure finished. The government must work hard in formulating the regulation to justify the lumpsum system. The fund will be given to projects that economically viable, but having profit gap under investor’s expectation.

Finance Ministry urged to issue regulation on MP3EI gap fund – Bisnis.com.

Indonesia’s rating upgraded one notch to investment grade

JAKARTA: Indonesia successfully has its sovereign debt rating upgraded one notch to investment grade. Fitch Ratings raised Indonesia’s sovereign debt rating from BB+ to BBB- after 14 years of waiting.

Director of Fitch Rating for Asia Pacific Philip McNicholas said that the international rating agency upgraded Long-Term Foreign- and Local-Currency Issuer Default Ratings with stable outlook. Wheres, the short-term Long-Term Foreign- and Local-Currency Issuer Default Ratings were upgraded to F3.

“The rating upgrade reflects the strong economic growth, and lower debt to GDP ratio. Besides strengthening liquidity, Indonesia has run prudent macroeconomic framework,” he said in a press statement.

Following the rating upgrade, Fitch projects the gross domestic product (GDP) will grow at average of more than 6% annually until 2013although global economy is less conducive.

The ratings agency perceives Indonesia’s strong growth is sustained by domestic economy and less depending on external loans. Yet, the growth prospect still needs to be tested against external shocks.

On the other hand, Fitch highlighted the weak structural issues, such as low income per capita, that is US$3,600. This figure is still far below BBB rating standards that require average income US$9,800 per capita. Yet, the relatively strong fundamentals of Indonesian structure in some categories have raised the rating to BBB-.

“Problems realted to climate change, bad infrastructure and corruption must be settled.”

Coordinating Minister for Economic Affairs Hatta Rajasa saw the rating upgrade has reflected the prudent fiscal management and macroeconomic policy of the government. He in fact did not show any worries on possible massive capital inflow after the rating upgrade as there are abundant investment opportunities to keep the investors to stay.

Ryan Kiryanto, Head of Economist of PT Bank Negara Indonesia Tbk, said that the upgrade to investment grade will build stronger confidence at the market to invest in Indonesia. Still, more capital is expected to flow into real and infrastructure sectors.

Ryan said the upgrade will benefit the financial sector as the country will be the target of foreign capital in terms of portfolio and foreign direct investment (FDI).

“Yields of Indonesian soreveign and corporate debts will come down as risks are becoming lower. This is the time for the government and corporations to issue bonds,” he added.

Similarly, I Made Adi Saputra, Analyst at PT Nusantara Capital Securities, also sees the benefit of the rating upgrade to sovereign debts. Foreign investors, according to him, become more interested in Indonesia’s bond market.

High demand will lead to good bargaining power for the government to determine lower yields.

Rahmat Waluyanto, Director General of Debt Management at Ministry of Finance, said that Indonesia is eligible for investment grade with its low debt to GDP ratio, moderate inflation rate and low budget deficit. Adding to these, Indonesia’s yields and credit default swap of sovereign bonds confirm the eligibility. “Global sukuk of Indonesia offers 4% yield, and 5-year CDS is at 150 basis points.”

Governor of Bank Indonesia Darmin Nasution agrees if the rating upgrade relates to success of Indonesia’s fiscal and monetery regulators to maintain macroeconomic stability and high growth.

President Director of PT Bank Mandiri Tbk Zulkifli Zaini welcomed the rating upgrade as a driver for more foreign capital to flow into national financial system, thus helping banks cut the cost of fund. (NOM)

Indonesia wins back investment grade – Bisnis.com.