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RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #2984/01 0661024
ZNR UUUUU ZZH
R 071024Z MAR 06
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 0713
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHKO/AMEMBASSY TOKYO 9656
RUEHBY/AMEMBASSY CANBERRA 9155
RUEHBJ/AMEMBASSY BEIJING 3302

UNCLAS SECTION 01 OF 08 JAKARTA 002984 
 
SIPDIS 
 
DEPT FOR EAP/IET, EB/IFD/OIA 
DEPT PASS OPIC, EXIM, TDA 
DOE FOR TOM CUTLER/PI-32 AND JANE NAKANO/PI-42 
COMMERCE FOR USDOC 4430--GOLIKE 
TREASURY FOR OASIA--ANNA JEWELL 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EINV ECON ENRG EAIR ELTN ECPS ID
SUBJECT: INDONESIA - GOVERNMENT OUTLINES INFRASTRUCTURE 
PLANS 
 
¶1. (SBU) Summary:  Coordinating Minister for Economic 
Affairs Boediono and other Government of Indonesia (GOI) 
officials outlined a wide ranging infrastructure 
development plan at a February 21 conference for 
potential foreign investors in Jakarta.  Boediono and 
other GOI speakers described an ambitious regulatory 
reform agenda through January 2007 that calls for the 
preparation of seven draft laws and more than 30 
regulations to create a predictable and transparent 
framework for infrastructure investment.  In parallel 
with an improved regulatory framework, the GOI also plans 
to create an integrated system for developing, tendering, 
and providing GOI support for selected public-private 
partnership (PPP) infrastructure projects.  Ministry of 
Finance (MOF) officials outlined an emerging GOI "risk 
sharing" framework for infrastructure projects, that, 
when completed, should enable ministries to tender more 
"bankable" PPP infrastructure projects and provide a 
mechanism for the MOF to assume limited risk in specific 
projects.  Despite some progress in 2005, Minister 
Boediono admitted that land acquisition for 
infrastructure projects remains a major problem, and said 
the GOI would continue to improve regulations and 
consider creating a revolving fund to finance land 
purchases.  Several GOI speakers stated the GOI will 
"fast track" a few high-profile power plant and toll road 
projects to show international investors that Indonesia 
is back in business after the economic turbulence of the 
late 1990s.  Private sector conference participants told 
their GOI interlocutors that they want to see continued 
regulatory reform, a clear and transparent tender 
process, a robust financial risk-sharing mechanism, and 
certainty in land acquisition and titling.  Among the 
GOI's ten priority infrastructure sectors, natural gas 
pipelines may be the most promising area for 
international investors in the short-term, but the GOI 
needs to clarify gas supply questions first.  End 
summary. 
 
¶2.  (U) The Coordinating Ministry for Economic Affairs, 
Indonesian Chamber of Commerce and Industry (KADIN), and 
World Bank co-hosted a February 21 conference in Jakarta 
at which the GOI outlined its infrastructure development 
agenda and solicited input from potential investors on 
reforms needed to attract investment to Indonesia's 
infrastructure sector.  The conference featured breakout 
sessions on the toll road, transportation, pipelines, 
municipal water, and electricity sectors with potential 
investors and GOI policymakers engaging in vigorous 
dialogue.  In his keynote speech opening the meeting, 
Coordinating Minister for Economics Boediono conceded 
that the GOI had so far failed to meet the goals of the 
January 2005 "Infrastructure Summit", and that progress 
in attracting foreign investors to viable infrastructure 
projects "has been unsatisfactory."   However, Boediono 
said the GOI has "concentrated its efforts to sort out 
the problems holding back infrastructure investment," and 
promised progress by the second Infrastructure Summit 
tentatively schedule for June 2006. 
 
Ambitious Regulatory Reform Agenda 
---------------------------------- 
 
¶3. (U) Boediono described an ambitious regulatory reform 
agenda intended to create a predictable and transparent 
framework for infrastructure investment.  He noted that 
Presidential Regulation (Perpres) 67/2005 (issued in 
November 2005) revised the principles governing public- 
private partnerships (PPP), emphasizing a competitive and 
open bidding process, clear risk allocation, and tariff 
structures designed to attract private investment with a 
reasonable return on investment.  Under the umbrella of 
Perpres 67, the inter-ministerial "National Committee for 
the Acceleration of Infrastructure Provision" (KKPPI) 
announced a policy matrix on February 17 listing 153 
specific actions the GOI would take through January 2007 
to boost infrastructure investment.  These actions 
include the submission of draft laws, the issuance of 
 
JAKARTA 00002984  002 OF 008 
 
 
regulations covering ten infrastructure sectors, and the 
enactment of institutional reforms in GOI infrastructure 
bodies.  Key action items in the matrix include: 
 
--The submission to Parliament of draft laws covering 
traffic and land transportation (by January 2007), 
railways (July 2006), shipping (July 2006), aviation 
(January 2007), electricity (June 2006), postal services 
(November 2006), solid waste (June 2006), mortgage 
securitization (June 2006), and regional government-owned 
enterprises (June 2006). 
 
--The issuance of more than 30 new or revised ministerial 
decrees or regulations covering a range of infrastructure 
issues and sectors.  These include regulations on foreign 
loans and grants (by January 2006), tariff policy for PPP 
projects for all modes of transportation (September 
2006), and implementing regulations for Law 38/2004 on 
Toll Roads (June 2006).  The GOI will also issue 
amendments to Presidential Regulation 36/2005 on Land 
Acquisition (March 2006) as well as regulations on oil 
and natural gas upstream and downstream activity by 
December 2006. 
 
--The adoption of a series of ministerial decrees 
establishing new or reformed institutions to coordinate 
the development and implementation of PPP infrastructure 
projects, including the provision of GOI support.  The 
new institutions include a PPP Center in the KKPPI 
Secretariat, PPP "nodes" in three key infrastructure 
 
SIPDIS 
ministries, and a "Risk Management Unit" (RMU) in the 
Ministry of Finance (see para 6 below). 
 
--The issue of two key KKPPI decrees scheduled for April 
2005 that would establish criteria for the prioritization 
of infrastructure projects and set up procedures and 
mechanisms for PPP projects requiring GOI financial 
support.  The former decree would pave the way for a 
KKPPI list of priority projects eligible for GOI support. 
 
--The preparation of engineering designs, feasibility 
studies, or tender documents for more than a dozen 
specific infrastructure projects in the transportation 
sector.  For some projects, construction is scheduled to 
begin in 2006. 
 
¶4. (SBU) Forum participants praised the GOI for its 
ambitious plans, but raised several concerns about the 
regulatory reform goals during the question and answer 
period.  Some participants expressed concern that the 
proposed reforms lack specificity and detail, and are 
piece-meal in nature.  They also worried that the 
timetable for adopting specific laws and regulations in 
the matrix often extends beyond the date of proposed 
project tenders in those sectors, making the preparation 
of high-quality tender documents difficult.  Still others 
expressed lingering uncertainty over the roles to be 
played by central versus regional government regulatory 
bodies for many infrastructure projects. 
 
¶5. (SBU) Suyono Dikun, Deputy Minister for Infrastructure 
Coordination and Area Development in the Coordinating 
Ministry for the Economy, told participants that the 
KKPPI understands the magnitude of the regulatory reform 
task, and would sponsor monthly meetings with 
stakeholders to monitor progress.  However, several 
participants questioned the lack of opportunity for 
public comment or formal consultations before ministries 
implement regulations, an important consideration given 
recent regulatory mishaps and the large number of 
regulations the GOI plans to enact during 2006.  One 
participant noted the lack of formal consultation 
mechanisms with the private sector and among GOI 
ministries creates the potential that forthcoming 
regulations may fail to address key problems and barriers 
to investment. 
 
Equally Ambitious Institutional Reform Agenda 
 
JAKARTA 00002984  003 OF 008 
 
 
--------------------------------------------- 
 
¶6. (SBU) Boedino, Dikun, and Dr. Anggito Abimanyu, Acting 
Head of the Ministry of Finance's (MOF) Agency for 
Economic Analysis and International Cooperation (Bapeki), 
outlined an equally ambitious institutional reform agenda 
that, when complete, would create an integrated system 
for developing, tendering, and providing GOI support for 
selected public-private partnership(PPP) infrastructure 
projects.  Key elements of the institutional reforms 
include the establishment of the Risk Management 
Unit(RMU) at the Ministry of Finance (MOF), a "PPP 
Center" in the KKPPI Secretariat, and PPP "nodes" in the 
public works, transportation, and energy and mineral 
resources ministries by May 2006.  The PPP Center will 
work closely with the PPP nodes in various ministries to 
standardize and raise the quality of PPP infrastructure 
project documents so the projects are more "bankable" for 
private investors and more suitable for GOI financial 
support or risk sharing.  The Ministry of Public Works' 
(MPW) experience in recent toll road tenders has shown 
that without high quality tender documents addressing 
land acquisition and other risks, very few foreign 
investors will participate. 
 
¶7. (U) Dikun said the PPP Center would play an important 
role as both coordinator and clearinghouse for review and 
management of infrastructure projects, particularly PPPs. 
It will also take the lead in managing the regulatory 
reform process, establishing a national list of priority 
infrastructure projects, and reviewing specific 
infrastructure proposals.  However, some participants 
expressed frustration with a lack of clarity in obtaining 
government review and approvals of projects under the 
current KKPPI system, as well as the existing web of 
requirements for multiple agency review and approval. 
KKPPI officials responded that once the integrated PPP 
system is up and running, investors will not need to go 
through multiple agencies, i.e. there will be no need to 
go "shopping around."  Under the policy matrix, Minister 
Boediono is scheduled to issue two key KKPPI decrees in 
April 2005 establishing criteria for the prioritization 
of infrastructure projects and setting up procedures and 
mechanisms for PPP projects requiring GOI financial 
support. 
 
Risk Sharing Policy Takes a Big Step Forward 
-------------------------------------------- 
 
¶8. (U) In their presentations, Minister of Finance Sri 
Mulyani Indrawati and Abimanyu described in detail the 
emerging MOF approach to risk sharing or GOI financial 
support for PPP infrastructure projects.  Mulyani 
cautioned that the GOI's "fiscal space for accepting new 
contingent risks is limited," and that the GOI would not 
provide any blanket guarantee because they are "less 
efficient and tend to create moral hazard."  However, she 
confirmed that the GOI would consider support for high 
priority projects with clear social benefits.  Mulyani 
said her ministry would issue a decree on a risk 
management framework in March 2006 that will outline the 
GOI risk sharing scheme, possible forms of GOI support, 
and procedures for requesting GOI support. 
 
¶9. (U) Abimanyu described two key approval processes for 
obtaining GOI risk sharing or financial support for PPP 
infrastructure projects the MOF plans to roll out through 
June 2006.  Once implemented, the two should enable 
ministries to tender more bankable PPP infrastructure 
projects and provide a mechanism for the MOF commit to 
limited financial support or risk sharing with private 
infrastructure investors in specific projects.  The two 
approval processes are: 
 
--A process in which ministries seek "in principle" 
approval by the Minister of Finance for GOI risk sharing 
or financial support for individual projects prior to 
their tendering.  The Minister would decide whether to 
 
JAKARTA 00002984  004 OF 008 
 
 
offer GOI support based on an evaluation by the RMU.  If 
granted, ministries would include this "in principle" 
approval in project tender documents, giving potential 
investors more certainty about the types of risks they 
must bear in a particular project. 
 
--After the conclusion of the tender process and 
announcement of a winning bidder, the MOF would grant 
final approval for GOI financial support or risk sharing 
for individual projects.  This process would follow 
evaluation by the RMU and the MOF-Chaired "Infrastructure 
Provision Risk Management Committee", a body with thirty 
members who serve on an ad-hoc basis.  The process would 
conclude with the signing of a contract with the 
investor. 
 
¶10. (U) Abimanyu stated that to guide its evaluation of 
project risk, the MOF would develop a "risk matrix" that 
would analyze the major risks faced by infrastructure 
projects in each sector, and outline possible mitigating 
strategies, including GOI support or partial guarantees. 
He grouped risks facing investors into five general 
categories: 
 
--Sovereign Risk: The risk of expropriation or 
confiscation of assets or changing composition of 
ownership due to political pressure. 
 
--Project Performance Risk: Unanticipated changes in 
laws/regulations causing substantial cost consequences 
for the private party.  This includes site risk (land 
acquisition, land price increase, environmental issues); 
design, construction and commissioning risk; and 
operational risk (tariff adjustment, maintenance, 
technical obsolescence). 
 
--Market Risk: The risk that investors may not be able to 
convert local currency revenue into foreign currency, or 
face restrictions on the amount they can transfer or 
repatriate.  Also includes risk from competition, general 
economic downturn, demographic change, and inflation. 
 
--Default Risk: A state-owned enterprise (SOE) fails to 
meet its payment obligation.  This is a key issue in the 
electric power and gas sectors, where SOEs are monopoly 
or near-monopoly buyers. 
 
--Force Majeure: War and natural disaster, for example. 
 
¶11. (SBU) Abimanyu noted that the GOI plans to begin 
consultations with Parliament shortly on securing a 
budget allocation to cover possible GOI financial 
contributions to PPP infrastructure projects, as well as 
the contingent liabilities posed by the GOI's acceptance 
of certain risks in projects.  This process will likely 
move forward as part of the annual budget process, which 
begins with the formulation of spending priorities by the 
State Ministry of National Development Planning 
(Bappenas) in March of each year, and concludes with the 
President's annual budget speech in August.  Depending on 
the type of GOI support, the MOF would either hold funds 
in a central contingency fund (similar to the current 
budget contingency fund for natural disasters), or 
include them in the budget of line ministries or other 
institutions. 
 
Critical Need for Certainty in Land Acquisition 
--------------------------------------------- -- 
 
¶12. (U) Boediono underscored that resolving land 
acquisition bottlenecks remains a critical issue for 
accelerating infrastructure development, and that ideally 
land should be available before tenders open.  If not, 
investors will lack certainty needed in bidding on a 
project because they "can never be certain how long 
acquisition will take or how much the land will cost." 
While noting that Perpres 36/2005 had mitigated the 
problem, Boediono and other GOI speakers outlined several 
 
JAKARTA 00002984  005 OF 008 
 
 
measures the GOI plans to take to further speed land 
acquisition: 
 
--The GOI will revise Perpres 36 by March 2006 to 
facilitate infrastructure development projects, 
particularly those that require a right of way. 
 
--The National Land Agency (BPN) will issue 
implementation guidelines for land acquisition by April 
¶2006. 
 
--The GOI will consider establishing a revolving fund for 
land acquisition so that the GOI could purchase land 
needed for infrastructure projects before they go out to 
tender. Under the revolving fund, winning bidders for 
infrastructure projects would reimburse the GOI for land 
acquisition costs related to the project.  The GOI would 
then use these funds to purchase land for subsequent 
infrastructure projects. 
 
¶13. (U) A number of participants raised concerns over the 
lack of clarity of land acquisition regulations, an issue 
of particular concern for toll road and pipeline 
projects.  Perpres 36/2005 provides a 90-day timeline for 
acquisition and formation of a compensation committee. 
However, the regulations lack specificity on composition 
of the committee, what agencies will control the 
appraisal process and award of compensation, and what 
parties are entitled to comment on the compensation 
process.  As a result, lengthy delays in land acquisition 
have been the norm. 
 
¶14. (U) Several participants also strongly disagreed with 
the idea that land acquisition risk should rest solely 
with the investor.  They recommended the GOI designate a 
single entity to oversee the land acquisition process for 
all infrastructure projects.  To avoid delays, 
participants suggested the GOI could provide initial 
payments to landowners based on a preliminary appraisal, 
allowing a project to move forward.  Any appeal by the 
landowner on the amount of compensation would then occur 
after transfer of title.  However, several participants 
pointed out that the viability of this process assumes 
courts would review valuations in a consistent and fair 
manner, and that the government would bear the risk of a 
court requiring a higher payment to a landowner. 
 
Marquee Projects on Fast-Track 
------------------------------ 
 
¶15. (U) In a step long urged by investors, Coordinating 
Minister Boediono and Abimanyu made special mention of a 
GOI decision to "fast track" several high profile 
projects that could serve as model deals and raise 
Indonesia's profile in the international investment 
community.  Boediono said the GOI recognizes the 
difficulties it faces in bringing Indonesia's 
infrastructure tender system up to world class standards. 
By getting a small number of demonstration projects off 
the ground quickly on terms attractive to international 
capital markets, Boediono said the GOI hopes to create 
model deals that it could replicate in the future. He 
added that getting a few model deals would also show the 
world that Indonesia "is back from the financial crisis 
and ready to do business." 
 
¶16. (SBU) Abimanyu stated that as part of the fast track 
program, the GOI would begin the evaluation process (for 
risk sharing purposes) of the 600 MW Cirebon steam power 
plant project (tender launched in September 2005) and one 
or more toll road projects.  For these projects, Abimanyu 
said the MOF would evaluate risk based on current GOI 
procedures and seek to add contingency funds to the 2007 
budget to cover any contingent liabilities. 
 
Transportation Sector 
--------------------- 
 
 
JAKARTA 00002984  006 OF 008 
 
 
¶17. (U) Seaport and airport development remain the GOI's 
top priorities in the transportation sector.  Ministry of 
Communications Director General for Sea Transportation 
Hariyogi focused his remarks on the proposed development 
of a hub container port in Bojonegara, West Java. 
However, several participants suggested that investment 
in Bojonegara may be a misplaced priority.  They 
recommended the GOI instead focus on developing existing 
basic infrastructure and operations, improving port 
management and efficiency, and implementing a national 
port policy, factors more critical to Indonesia's 
attractiveness as a destination for international 
shipping companies and port investors/operators.  Noting 
that the shipping industry itself is now the largest 
investor in port development worldwide, industry 
representatives encouraged the GOI to tackle several 
additional priorities to draw in greater foreign 
investment: 
 
--Repeal restrictions on charges allowed by port 
operators for terminal handling services, and instead 
allow operators and shipping companies to negotiate these 
fees commercially, the standard practice in the shipping 
industry.  A [November 2006] GOI restriction effectively 
caused a 25 percent reduction in fees for port operators. 
 
--Develop full capacity at Tanjung Priok port in Jakarta 
before considering major expansion in Bojonegara. 
 
--Improve efficiency in container loading and general 
port operations. 
 
--Focus on port development in locations closer to the 
Malacca Straits (including Batam), since Jakarta is too 
far from major international shipping lanes to serve as 
an international container port hub. 
 
--Revise regulations and improve outreach to attract 
foreign investment to smaller ports in regional 
locations. 
 
--Establish better rail links to ports. 
 
¶18. (U) The top priorities for airport development are 
new terminal and cargo facilities at Soekarno Hatta 
International Airport in Jakarta, and construction of new 
airports in Medan, Makasar, and Lombok.  The single 
largest project is the new Medan airport, for which the 
GOI is seeking USD 225 million in private investment. 
Participants noted the greatest barrier to private 
participation is the lack of GOI resolve to push forward 
on airport projects with clear timelines, citing as an 
example the Medan Airport project first proposed in the 
mid-1990s.  They also stressed the importance of 
coordinated timing between the public and private 
components, such as construction of road access, runways 
and terminals--few companies want to invest in airports 
without roads leading to them. 
 
Toll Road Development 
--------------------- 
 
¶19. (U) GOI speakers repeatedly emphasized that toll road 
construction remains a top priority.  They described 
progress in toll road regulation in 2005, including the 
adoption of Government Regulation 15/2005 which ended 
state-owned toll road company Jasa Marga's regulatory 
functions and established the Indonesian Toll Road 
Regulatory Board (BPJT) in the MPW. However, they 
conceded that the MPW tendered only a small number of 
projects from the list announced at the January 2005 
Infrastructure Summit, and that these transactions were 
not up to international standards.  As a result, only one 
of six toll road sections tendered in a first group of 
projects in 2005 is in final negotiation.  In addition, 
only four out of 13 toll road sections tendered in a 
second round have eligible bidders in the pre- 
qualification stage. 
 
JAKARTA 00002984  007 OF 008 
 
 
 
¶20. (U) Participants emphasized that any viable toll road 
tender must give an operator the right to increase 
tariffs to account for inflation and currency rate 
fluctuations, and receive approval for such increases 
without delay.  Under the Toll Road Law of 2004, the 
Minister of Public Works determines toll road tariffs, 
which may be adjusted only every two years pegged to the 
increase in the Consumer Price Index, any without any 
consideration of currency exchange rate fluctuation. 
Several participants also commended the MPW for 
developing a toll road master plan (which would help 
estimate usage in planned toll road segments), but others 
noted that completion of the plan by December 2006 may be 
overly optimistic. 
 
Gas Pipelines May Be Promising 
------------------------------ 
 
¶21. (U) The natural gas sector may be the most promising 
in the short-term for international investors, according 
to several forum participants.  One local energy sector 
analyst noted that he sees tremendous potential for the 
downstream gas sector, but cautioned that the overriding 
incentive for inward foreign direct investment will be a 
robust upstream oil and gas sector.  He noted that 
foreign investors would be eager to build pipelines if 
exploration companies are finding hydrocarbons and are 
able to sell their products at world market prices. 
 
¶22. (SBU) The main practical concern for potential 
pipeline investors remains the certainty of gas supply. 
Few international banks will finance gas pipeline 
projects without a rock-solid guarantee of a steady 
supply of gas.  During 2005, the downstream regulatory 
body BPH Migas tendered two pipeline projects, the Grisik- 
Semarang-Cirebon (East Java to West Java) pipeline and 
the East Kalimantan - West Java pipeline.  With the 
question of gas supply unresolved due to unclear GOI 
guidance on a domestic market obligation (DMO) for all 
new natural gas projects, the two tenders have attracted 
little international interest. The GOI will need to 
clarify the DMO for future gas projects to attract 
foreign investors to the pipeline sector, according to 
many conference participants.  One bright spot for the 
sector is that unlike state electric monopoly PLN, state 
gas company PGN has no credit quality issues that would 
inhibit potential foreign investors. 
 
Electricity: Great Need, Much Risk 
---------------------------------- 
 
¶23. (U) Potential investors in the electricity sector 
told the GOI representatives that their top concerns 
include achieving greater regulatory transparency and 
predictability in tariff setting.  They said a 
predictable revenue stream and transparent mechanism to 
gain GOI approval for rate increases are crucial for 
making projects bankable.  Participants quizzed GOI 
panelists on the proposed risk-sharing scheme, which they 
said would be crucial for attracting investment given 
PLN's poor creditworthiness.  They also expressed concern 
about the reliability of feedstock supply for power 
plants, given the uncertain nature of the natural gas 
DMO. 
 
¶24. (U) Director General of Electricity and Energy 
Utilization at the Ministry of Energy and Mineral 
Resources (MEMR) Yogo Pratomo told participants the GOI 
will speed up the tender process for the construction of 
eight new power plants so that they can begin commercial 
operation between 2010 and 2011.  He noted PLN estimates 
that Indonesia will need to add 6,000 MW of power each 
year through 2015 just to keep up with current demand. 
With economic growth rates rising, electricity demand is 
sure to rise with it. 
 
¶25. (SBU) Pratomo said the tender for the 600 MW Cirebon 
 
JAKARTA 00002984  008 OF 008 
 
 
steam power plant, opened in September 2005, is the 
highest priority, but that the MEMR should open tenders 
for seven other power plants by the end of March. These 
include a 500 MW combined cycle power plant in Pasuruan, 
East Java, a 2 x 600 MW coal-fired power plant in Jepara, 
Central Java, the Paiton 3 and 4 coal-fired power plants 
(2 x 400 MW) in East Java, a 2 x 60 MW coal-fired power 
plant in East Kalimantan, a 2 X 100 MW coal-fired power 
plant in North Sumatra, a 2 X 100 MW coal-fired power 
plant in Bali and a 2 X 25 MW coal-fired power plant in 
South Sulawesi.  The quality of the tender documents for 
these projects is unclear--a Japanese participant in the 
forum told us that Japanese companies have submitted only 
pro forma non-conforming bids in the Cirebon tender 
because of the absence of any GOI risk sharing and 
questions about the project design. 
 
¶26. (SBU) Comment:  The GOI did an impressive amount of 
homework for the February 21 forum, and in the eyes of 
most participants, has made up a good deal of the 
credibility it lost after the first Infrastructure Summit 
produced virtually no tangible results.  But the 
Coordinating Ministry for Economic Affairs is proposing 
changes on a very large scale, and few of our contacts 
believe the GOI will be able to adhere to the deadlines 
in its policy matrix.  Even so, the GOI will likely be 
able to keep investors' attention if it can get one or 
two "fast track" projects off the ground before the next 
infrastructure summit tentatively scheduled for June 
¶2006.  Even this task will be very difficult, however, 
and require the GOI to confront tough issues like PLN's 
creditworthiness, possible future electricity tariff 
increases, and corruption in land acquisition.  If the 
GOI can cut through these knots and get a few deals 
going, we expect at least a few potential investors will 
take notice. 
 
AMSELEM