In­done­sia ex­pected to scrap RM74b worth of in­fras­truc­ture projects

The Sun (Malaysia) - - SUNBIZ -

JAKARTA: In­done­sia’s chief eco­nomic min­is­ter said on Mon­day that 14 in­fras­truc­ture projects, worth 264 tril­lion ru­piah (RM74.5 bil­lion), are ex­pected to be dropped from the gov­ern­ment’s strate­gic de­vel­op­ment plan due to lack of progress.

These projects will be dropped if they don’t meet some re­quire­ments by the third quar­ter of 2019, Darmin Na­su­tion said, which is the end of Pres­i­dent Joko Wi­dodo’s cur­rent term.

In­fras­truc­ture de­vel­op­ment is one of Wi­dodo’s main eco­nomic plat­forms as the econ­omy strug­gles to re­move lo­gis­ti­cal bot­tle­necks.

Na­su­tion said the gov­ern­ment wants to fo­cus on the 222 in­fras­truc­ture that are still on its list of “strate­gic projects”, with a com­bined value of around 4,100 tril­lion ru­piah.

Rat­ing agen­cies have pre­vi­ously warned that bal­ance sheets of state- owned en­ter­prises (SOEs), which have been tak­ing up most of the gov­ern­ment’s in­fras­truc­ture projects, have wors­ened as they took on more debt to fund projects.

“By slow­ing the pace of im­ple­men­ta­tion, it could mean the gov­ern­ment is pri­ori­tis­ing in­fras­truc­ture projects, which may limit con­tin­gent li­a­bil­ity risk, but have im­pli­ca­tions for medium-term growth,” Moody’s sovereign an­a­lyst Anushka Shah told Reuters ahead of Na­su­tion’s an­nounce­ment.

Moody’s up­graded In­done­sia to one notch above its low­est in­vest­ment grade last week, a move that could help South­east Asia’s largest econ­omy get cheaper fi­nanc­ing for its projects.

But the agency said there was a risk of SOEs’ fi­nan­cial strength ma­te­ri­ally wors­en­ing to the point that it could hurt state fi­nances.

S&P cau­tioned against the same is­sue last month and the gov­ern­ment has said it would mon­i­tor liq­uid­ity risks of SOEs, es­pe­cially those in con­struc­tion and power sec­tors.

There were also safety con­cerns that led to the gov­ern­ment sus­pend­ing a num­ber of road and rail con­struc­tion projects for a short eval­u­a­tion ear­lier this year.

Among the projects ex­pected to be dropped are rail­ways in Kal­i­man­tan and South Su­ma­tra and sev­eral air­port and sea port projects in Java.

“There are projects that have land (ac­qui­si­tion) prob­lems, in­vestor prob­lems, and even there are prob­lems re­lated to the fea­si­bil­ity of the project it­self,” Trans­porta­tion Min­is­ter Budi Karya Su­madi told re­porters.

Na­su­tion said the next gov­ern­ment was wel­come to re­assess and re­sume the projects, if deemed nec­es­sary.

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