Indonesia earmarks $11.7 bln for infrastructure - fin min

Published: 13 Apr 2010 17:29:03 PST

JAKARTA, April 13 - Indonesia may raise its infrastructure spending target for 2010 to 105.6 trillion rupiah ($11.71 billion), the finance minister said on Tuesday, an increase of 13 percent from its earlier target.

Poor roads, energy, and transport infrastructure have stymied growth in Southeast Asia's largest economy but much-needed infrastructure development is often held up by red tape and a lack of financing.

"Infrastructure spending in 2010 will be increased to 105.6 trillion rupiah, from 93.7 trillion rupiah previously," Finance Minister Sri Mulyani Indrawati told parliament.

The proposed increase, however, is still subject to parliamentary approval.

Indrawati said the funds would be used for several infrastructure projects including improvements to an international airport in North Sumatra, repairing main roads on all major islands in Indonesia, and renovating bridges.

Analysts say Indonesia needs to improve its infrastructure to meet its 2010 economic growth target of 5.5 percent and reduce unemployment to about 8 percent.

Last year, President Susilo Bambang Yudhoyono promised to spend $140 billion over five years on infrastructure to generate growth of 7 percent or more by 2014.

Analysts see infrastructure development as a vital step toward Indonesia achieving an investment grade credit rating.

To meet the target, the government is trying to address conflicting laws and land acquisition problems which discourage private investors from joining public private partnerships (PPP).

Indonesia plans to offer 100 infrastructure projects under the PPP scheme, worth more than $473 billion, to domestic and overseas investors this year, said Bastary Pandji Indra, director of PPP at the planning agency.

The projects include power plants, toll roads, railways, and water facilities. Some of these were offered before but attracted little interest from investors because they were considered uncommercial, and have now been repackaged.

China agreed earlier this month to provide about $1.8 billion in soft loans to Indonesia to fund the import of Chinese goods for infrastructure development. [ID:nJAK107063] ($1=9015 Rupiah) .