CLSA infrastructure updates

Sarina and Mita met with Prof. Dr. Danang Parikesit, Policy Adviser to the Minister of Public Works to get his take on the lack of the infrastructure development in Indonesia.

· Urgency to have the bill on land acquisition passed by end of this year. The government is on the verge of offering a new Bill on Land acquisition procedure to Parliament.
· The bill will essentially empower the National Land Agency (BPN) to revoke land-right certificates for areas designated for government and PPP’ infrastructure projects.
· The time limit for land clearing negotiation prior to submitting to court for any dispute, is proposed to be shortened as well.
· Construction will start even though the negotiation process is taken up to court.
· Currently, there are 742km toll road in operation
· Our forecast is an additional ~300km to be in operational in next four/five years, mostly from Jasa Marga (JSMR IJ).
· The government had expected 769km additional toll roads in the same period; we believe this target is too ambitious unless the new bill is passed.
· Implications on stocks. JSMR, the largest toll road operator in Indonesia is well positioned to benefit from the change in land acquisition law. Construction companies like Wijaya Karya, and the cement companies (Indocement, and Holcim) are also beneficiaries to more infrastructure development. Indirect beneficiaries will also include the property developers (Bumi Serpong, Summarecon, etc) and cement stocks which benefit from greater infrastructure spending.