Q+A-Will Indonesia’s planned land law speed up infrastructure?

By Aditya Suharmoko and Sunanda Creagh

JAKARTA, Oct 18 (BestGrowthStock) – Indonesia plans to revamp its
land law, which investors hope will speed up the acquisition of
land to help build infrastructure ranging from roads to
airports.

Inadequate infrastructure is seen as a deterrent to
attracting foreign direct investment to Southeast Asia’s
biggest economy, and improvements would bolster long-term
finances and improve the chances of an investment grade
sovereign rating.

Reuters has obtained a copy of the government’s draft bill,
which is expected to be submitted to parliament before the end
of this year.

Here are some questions and answers on it:

WHAT’S NEW ABOUT THIS BILL?

The new bill applies to a selection of infrastructure
projects such as roads, railways, drainage systems, dams,
ports, airports, train stations, bus terminals, and other
projects deemed by the president to be in the public interest
and listed in the government’s official medium-term development
plan.

If private land is required for a project, an appraisal
committee will consult owners and determine what compensation
should be paid. The committee will include representatives of
local mayors or governors, as well as National Land Agency
(BPN) bureaucrats.

Compensation can be in the form of cash, housing, landswaps
or an equity stake in projects.

Significantly, the new bill sets timeframes. Cash
compensation must be paid within 60 days, while other forms
within an agreed time frame.

Landowners who object to compensation offers have 14 days
to appeal to the High Court, which must issue a decision within
30 days. No further appeals are allowed and the government has
the right to cancel titles if an appeal is dismissed.

Frans Sunito, chief of Indonesia’s top toll road builder
Jasa Marga, is upbeat for the bill’s prospects.

“The current problem is that we do land acquisition by
negotiating,” he told Reuters.

“If the seller says no we can’t build … some acquisitions
could even take years to complete,” he said.

WILL IT BE ENOUGH TO SPEED INFRASTRUCTURE DEVELOPMENT?

While there are several positive changes in this bill, more
needs to be done to boost infrastructure in Indonesia and the
new law will not help overcome institutional problems within
the National Land Agency, which suffers from a legacy of graft.

Indonesia also struggles to attract sufficient financing
for infrastructure. Finance Minister Agus Martowardojo recently
admitted that the government can only provide 35 percent of the
budget needed for infrastructure projects in the next five
years.

It’s unclear how much sway local representatives will have
in the land acquisition committees — if given sufficient
power, regional leaders may quash locally unpopular projects.

Senior ministers hope the bill will be submitted to
parliament by the end of the year, but even if this is
achieved, the inefficiency of the parliament means it could be
another six months to a year before it is passed — parliament
passed only seven bills in its first year of office.

Most major parties will likely support the bill, but
developers will still need to wait another six months to a year
for the release of implementing regulations needed to give
details on how the law would work in practice, so it may be
2012 before coming into effect.
(Additional reporting by Janeman Latul; Editing by Neil
Chatterjee)
([email protected]; Reuters messaging:
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Q+A-Will Indonesia’s planned land law speed up infrastructure?