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JAKARTA, Nov 13 (Reuters) – Indonesia announced plans on Wednesday for $35 billion in new infrastructure projects from next year in a bid to tackle one of the biggest deterrents to investment in Southeast Asia’s biggest economy.
Of the 56 planned projects, 32 are meant to be partnerships between the private and public sector, which Indonesia calls ‘PPP’ ventures.
“We want the PPP scheme to dominate the development projects,” chief economic minister Hatta Rajasa told reporters, adding that there would have to be incentives to attract private investors.
Indonesia has attracted record applications for foreign investment in recent years, but the level has started to slow in the face of a weaker global economy and some severe infrastructure bottlenecks.
Economists say the government has to urgently address problems such as congested ports and crumbling roads if it is to have any hope of competing for investment with other fast-growing Asian nations.
On Nov. 6, Indonesian officials said they planned soon to remove or reduce barriers to foreign investment in a number of key sectors, including airports and ports.
The list released on Wednesday of 56 projects shows a spread across the world’s largest archipelago, but many are on the islands of Java and Sumatra. Several are in the sprawling eastern island of Sulawesi and on resource-rich Kalimantan, on the island of Borneo.
Among the projects, which will start between 2014-2017, are eight seaports, two airports, eight railways, five power plants and 11 water supply and waste treatment, of some will be done by PPPs. There are also railways and number of highways, including toll roads in Sumatra, one of the world’s largest islands.
No new railway line has been built in Indonesia since the end of Dutch colonial rule nearly 70 years ago.
The government said the first 15 projects will start next year, including a port at Kuala Tanjung in North Sumatra to boost coal and palm oil exports, a $447 million upgrade to Jakarta’s barely functioning sewerage system and developing a new airport in West Java, between Jakarta and Bandung, to lift some of the burden on the capital’s overcrowded main airport.
“These infrastructure projects are crucial to sustain Indonesia’s long-term growth,” said Andy Ferdinand, head of research at Batavia Prosperindo Sekuritas in Jakarta.
But in the shorter term, spending on the investments will not be enough to reverse a slowdown in the economic growth rate due to slackening domestic demand and weak exports deficit, he added.
Reporting by Fathiya Dahrul; Writing by Andjarsari Paramaditha; Editing by Jonathan Thatcher and Richard Borsuk
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