Indonesia Parliament Passes Land Bill in Boost to Yudhoyono’s Growth Plans

Indonesia’s parliament approved a land-acquisition bill that will allow the government to accelerate road, port and airport projects, bolstering President Susilo Bambang Yudhoyono’s efforts to boost growth.

Lawmakers passed the legislation today after The Land Procurement Parliamentary Special Committee and the government agreed on a draft of the bill Dec. 14.

The bill may reinvigorate Yudhoyono’s push to double spending on roads, ports and airports to $140 billion and increase economic growth by an average 6.6 percent per year by the end of his term in 2014. While fiscal stability under the president helped the country regain an investment-grade credit rating after 14 years, gains in Southeast Asia’s largest economy have been undermined by corruption scandals and project delays caused by land disputes.

“This is a good signal for investors to get involved in infrastructure projects,” said Wisnu Wardana, an economist at PT BNI Securities in Jakarta. “Combined with Fitch’s upgrade, it will give new power to the government to boost projects. We can see significant impact to Indonesia’s economy starting from 2013.”

Rating Raised

Fitch Ratings raised the country’s long-term foreign and local currency debt to BBB- from BB+ yesterday, citing “strong and resilient economic growth, low and declining public-debt ratios, strengthened external liquidity and a prudent overall macro policy framework.”

Indonesia lost the investment grade rating in December 1997, during the Asian financial crisis. The rating puts the nation on the same level as India.

Indonesia’s currency rose for the first time in four days, gaining 0.6 percent to 9,035 a dollar as of 10:50 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. Bonds climbed, with the yield on Indonesia’s 8.8 percent Islamic dollar notes due in 2014 dropping the most since May 2010, data from Royal Bank of Scotland Group Plc show.

The Jakarta Composite index of stocks added 1.7 percent, the best performer in Asia today, as PT Astra International, the nation’s largest automotive retailer and the biggest stock by market value, rose 4.1 percent. PT Citra Marga Nusaphala Persada, a toll-road operator, advanced 0.6 percent, set for the first increase in three days.

Doubling Spending

Indonesia’s 2011-2025 development plan seeks 4,012 trillion rupiah ($440 billion) of investment, with 1,786 trillion rupiah assigned to items such as highways, harbors and power plants. Yudhoyono is seeking to improve Indonesia’s roads, bridges and ports to spur annual economic growth of as much as 9 percent, closing to Chinese and Indian rates of expansion.

The law change means Indonesia will be able to double the amount of infrastructure spending in the next two or three years from 3 percent of output now, said Trade Minister Gita Wirjawan.

“This reform will allow us to ramp up that percentage to 5 or 6 percent and unleash a significant amount of value,” Wirjawan said in an interview in Geneva, where he is attending a World Trade Organization ministerial meeting. “This will entail certainty on two things: pricing and timing. This is great, because in the absence of this, it’s virtually impossible to make a business plan or to clear land for infrastructure development.”

Toll Roads

The government plans to boost capital spending by 19 percent to 168 trillion rupiah next year, Yudhoyono told parliament in his annual budget speech on Aug. 16.

PT Jasa Marga, the country’s biggest toll-road operator, may accelerate its plans when the bill becomes law.

“We plan to build nine toll roads totaling about 215 kilometers (134 miles),” Jasa Marga Corporate Secretary Okke Merlina said yesterday. “Until now we’ve only built about 20 kilometers because of problems with land acquisition.”

During the president’s first five-year term, 125 kilometers of toll roads were built, compared with China’s 4,719 kilometers of toll roads in 2009 alone. A 1961 law says that only the president can seize land if owners refuse to sell. Yudhoyono was elected to a second term in 2009.

The law will set a deadline of 74 working days to resolve all legal issues in the event of objections to any land acquisition for infrastructure projects, Taufik Hidayat, vice chairman of the Land Procurement Parliamentary Special Committee, said Dec. 14.

An independent appraiser will decide on compensation in the form of money or land relocation for people giving up the property for development, he said.

To contact the reporters on this story: Novrida Manurung in Jakarta at nmanurung@bloomberg.net; Hidayat Setiaji in Jakarta at hsetiaji@bloomberg.net

To contact the editors responsible for this story: Greg Ahlstrand at gahlstrand@bloomberg.net; Stephanie Phang at sphang@bloomberg.net

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