 If not, I'll share my good questions with you. Is there a button there? Well, you know, but having seen enough screwed-up democracies, I think there's, you know, maybe we should run a few doors. You know, maybe there we go. Okay, hello. Very good afternoon to you, everybody. My name is Desi Anwar and it's a pleasure and honor for me to chair this session building on bottlenecks upgrading Asia's infrastructure. And for those of you who are new to Jakarta, a very great welcome to this city. And I think bottleneck is an apt way to describe this city. As a matter of fact, Jakarta is becoming one of those cities where we don't ever experience a rush hour. Every minute is the rush hour. And I have a fair notion why this conference begins, is held on a Sunday. It's because it's the only day where we can get anywhere actually on time and not to be late. And also it's the one day during the week where Jakartans can actually enjoy the roads because some parts of the roads are actually closed for cars for a few hours. So everybody can actually go out and do something else such as biking. The thing about economic growth, especially in Indonesia, it has not been matched by infrastructure growth. As I've mentioned, the number of cars in the last four or five years have grown dramatically and it has not been served with the proper infrastructure. For example, we haven't, even Jakarta has not seen one single new road in the last decade. And the other thing is that if every year, for example, we celebrate what we call the Earth Hour where cities switch off the electricity for one hour, we can be sure that every week somewhere in some part of the country and even in Jakarta we experience regular blackouts. And we mentioned that Indonesia is number two after the United States when it comes to social networking such as Facebook and Twitter. We actually have an exponential growth in terms of internet penetration and yet we are still downloading the internet in terms of kilobytes. As we can see, the lack of basic infrastructure, whether it's a road or whether it's our connectivity, it's slowing down the growth, it's hampering our economy and it's a lot of time wasted, a lot of fuel wasted on the road, a lot of wasted productivity and it's costly for our growth. So you need more time, more fuel, more effort when the infrastructure could actually help to support this growth. So the session that I will be chairing this afternoon is called Building Around a Bottleneck, Upgrading Asia's Infrastructure and the question is how could Asian infrastructure be implemented so it will support growth rather than hamper growth and I have with me six extremely distinguished panelists. Welcome gentlemen. The first one is Dominic Barton, Worldwide Managing Director McKinsey and Company from the UK and also the co-chair of World Economic Forum on East Asia Dominic. Welcome and Ajit Gulabchan all the way from India, Chairman and Managing Director of the Hindustan Construction Company. Stuart Gulliver, Group Chief Executive of HSBC Holdings UK and also co-chair of the WF on East Asia Madhu Koneru. Executive Vice Chairman, Minerals, Energy and Commodities from the United Arab Emirates, John Rice, Vice Chairman from General Electric Company, GE in Hong Kong and last but not least, Gita Wiriawan, Chairman of Indonesia's Investment Coordinating Board. Welcome gentlemen, my first question, perhaps more pertinent for you Dominic as we talk about the infrastructure policy particularly in Asian countries and what do you see are the main challenges that Asian countries are facing when it comes to implementing infrastructure policies and what is the best way for governments in developing countries to actually plan out their infrastructure policies? Well I think there's quite a wide range of issues that are there and more qualified people than me to talk about it for example in the financing side, the long-term savings, pension funds and so forth and then the people actually doing the construction and working with the government if it's a private-public partnership. What I'd just like to focus on is one specific part which is more operational and it is really around the regulatory complexity when you try and get something done so when you look at things like land rights or land usage, this can be a big bottleneck for people to be able to get it through so if you are running a road that cuts across provinces or different jurisdictions which we see in actually many Asian countries and you have to negotiate with each local government as to what the rules are, it's probably frustrating in terms of how you work it. I think that the second issue is around the prioritization. We know as others again will speak, there's roughly between $8 to $10 trillion of infrastructure that's required over the next 10 years in Asia. The question is how do you prioritize that and if you're going to go and want to do that with a particular government what's first priority, the rank order and what you find in a number of the countries in Asia is there's a whole hodgepodge of them that are there. Different interests have different views as to whether it's the power, roads or airports and so forth so getting a very clear sense of priority is key and the third area is really around just the regulatory certainty that goes with this which I think is a big issue. A lot of the infrastructure requirements are greenfield not brownfield and if you're a pension fund that can worry you because you don't have anything to base it off in terms of looking at what true consumer demand is like how many cars will actually go on that road how will pricing be done in that particular utility and so we have a lot of greenfield requirements so what's the arrangement that we can put in place that can help those funds that actually have a lot of money and do want to invest I'm talking about outside the country itself have some certainty in terms of how they're going to be able to do that and I think that right now I'm generalizing but I would say across the region except perhaps for some of the cities in China where there's a little more clarity and certainty around it it just takes too long and it's too complex to be able to get it done you get too much of a headache trying to work it through and yet we need to do it and I would hope that we could have if we could get a reference case in the country and had the decision rights if you will to have a reference case to show how we can actually go from the idea to the design, the cooperation and the implementation in a period of time that I think would accelerate what we could be doing in other parts of the region but also in that country Dominic, certainly land issues, regulations these are the problems that Indonesia is currently facing but what advice would you give to governments such as in Indonesia having difficulties in actually implementing those projects and how would you recommend that they should prioritize? Well one thing is on the prioritization we'll hear from Gita I think they probably do have a good sense of the priorities I think the thing is to take as I said a reference case and if you will fast track it the problem is there's not a lot of best practices around the world I can't point to a country that does this in an outstanding manner maybe some other colleagues can but what I will say is there's two countries that are now going for it one is Columbia and one is Chile and the Colombians are basically saying the president is saying you come and we've figured out these priorities and we will work with you to figure out what all the bottlenecks are and where they are with the investors and all of the different players and I think if we could focus in Indonesia on one or two sort of lighthouse projects and actually map out what it is that would be required some changes may not be possible for example on the land use I'm not sure again where the degrees of freedom the government would have but if you can at least lay that out and have total awareness of where that is in a commitment almost a fast tracking of trying to debottleneck it I think then we could move it but I'd focus on one or two to get them right and then you replicate it as opposed to have a whole pile of them going at one time which could be frustrating a lot of people but in Colombia Colombia and Chile do they have land issues? they have land issues they've got security issues how did they actually unfortunate thing is they haven't done it yet they're doing it if you will and that's the but there's a commitment President Santos has said it's what you mentioned at the beginning you're not going to get they're trying to raise their GDP growth by a 3 percentage point they're just going to require infrastructure to do it so he's got a whole communication program around it's in all of our interests to be able to get this infrastructure done because we're all going to be better off so there's a big communication program going on in the country to explain to people and then they're just in the process now of driving it but as I said it's not done it's just a commitment from the president to deliver, if you will to drive it to then be able to replicate it and the same as in Chile the only thing I'd say that's different about Chile is the earthquake actually I say this in all respect actually helped because you've got to build hospitals and you've got to build schools and you've got to build roads in record time they were forced to and that led to some changes I remember even 10 years ago we talked about you know 10,000 kilometers of roads will be built around the country and 10,000 megawatts and so on and so forth and until now unfortunately the proof, as I say is in the pudding Agit, you're from India there's a construction infrastructure company India how do they do it in India also which is an extremely high growth country with a huge population I'm particularly interested in for example on how to solve the mass rapid transportation system which until now unfortunately Jakarta even though it's a huge metropolis of 12 million people who do not yet have adequate efficient MRT how do you do it in India India is a mixed story you have grad successors at cement and there are utter failures in the other end we have some structural problems in the sense that our local self-government cities and towns are not managed by themselves whilst the states do and this is a very strong central government it's too large a country and a lot of urban infrastructure is not getting built because it does not have powerful town and city governments in addition to that there are certain issues of certainty certainty of policy on environmental issues on land acquisition on some of the economic viability because what needs to be charged to a population that is not likely to pay adequately for the public services that infrastructure entails do lead to an economic viability problem that remains unresolved and these are issues that are bogging India down can you give us some examples of those issues for example on one side we had a national highway authority that has been extremely successful it created a new model of public-private partnership and before this authority was put into place we were doing 11 kilometers of building 11 kilometers of roads per year we came up to building 11 kilometers of loads per day because of a new kind of public-private partnership where barring the ownership of the roads almost everything was done privately by outsourcing including in most of the roads where investment would be private as well now this was very successful it runs into trouble from time to time it slows down but even when it slows down we are still able to achieve about 10 kilometers of roads per day and I think this has been a successful way of dealing with it because the infrastructure to be built is so much and so quickly particularly because of the large migration to cities that we are now seeing about 400 million people will expect to migrate to cities in India in the next 30 to 40 years a migration that took place in Europe over a thousand years and this kind of migration is very difficult to handle so it does require more local self-governance to deal with it a more certainty of regulation which is very difficult because various constituencies of environment of social equity as well as financial viability I mean affordability are constantly at at loggerheads with each other in trying to make sure that they are all incorporated into a project very often after the project is under implementation this has caused a number of problems yet as I told you it's a mixed story of successes at some end and lots of things that should have started 10 years ago are yet to begin So is there overlap between for example local government and central government when it comes to building infrastructure and you know especially in terms of funding Constitution of India lays down very clear rules of the what can be governed by the states and what can be government by the central government there are some concurrent lists and they tend to overlap sometimes but the fact remains that whilst this is the case not enough authorities and autonomies exist with the states to be able to carry out their own programs because of the imbalance distribution of funds of taxes collected between the states and the center and due to excessive centralization which came with central planning soon after independence there has been a tendency of central dominance which then does not allow local self-governance to adequately grow on their own wherever they have been allowed particularly after liberalization we have seen some of the states grow at even growth rates of 14% and that has been quite remarkable but nevertheless you will find therefore for every bad story in India there is also a good story because it's substantially private sector led growth and it has been able to cope with whatever reforms have allowed it to do so and has been able to overcome the shortcomings that are even prevalent in spite of lack of the government policies and certifications. Okay Ajit Prasikar gives an example for example is there an MRT in Mumbai? There is a mass transit system in Mumbai for the last almost 70-80 years but that is woefully inadequate to the population of Mumbai today and it requires a much bigger system a much wider network and is that being built? It is being built for the last 20 years and not yet started Okay and for things like that or maybe in other cities for example how long does it take for a project for example to get off the ground? In this particular case Mumbai does not manage itself subject to the state government of Maharashtra or which Mumbai is the capital and that works with the central government and particularly the railway ministry in order to create this particular mass rapid transit system Some of the states have taken up the model and begun their privatization like in Andhra Pradesh the Hyderabad mass rapid transit system is being created by the state government for the city of Hyderabad through a public-private partnership process and that has just begun Similarly Delhi had an example of two actually public sector that central government and the Delhi government coming together sharing 50-50 equity in a mass rapid transit system a local subway system for Delhi So some such mixed public sector undertakings working with each other in order to create that has been able to work because people are not willing to pay the kind of prices that economic viability of such systems demands and therefore calls for an element of viability gap funding or subsidies which only state-run units can give and therefore you have a success in Delhi it is expected to be replicated in Hyderabad with on a completely private basis Bangalore is looking at it Calcutta is entirely a government of India undertaking so we have a whole types of different types of models being worked out but we haven't made the kind of progress Indian cities need Stuart perhaps this is a good moment to actually talk about the financing building infrastructure is an expensive business somebody has to foot the bill especially even a government budget doesn't stretch that far and we talked about private public partnership what would you say about the best way of financing infrastructure projects and what kind of return of interest are we talking about that investors before they are interested in financing such projects It's an interesting the number that Dominic mentioned 8 trillion US dollars of infrastructure spend seems on the face of it a daunting number and here in Indonesia the estimate is about 250 billion US dollars over the next five years if you are going to build your 10,000 km of road and so on but actually if you look at it Asia's got a colossally high savings rate so there's a huge amount of private money but it sits in the banking system and it sits in very short term deposits Asia's also got a colossal amount of reserves which sit with sovereign wealth funds and that goes in funds basically the debt of Western Europe and the United States what the issue is is of mobilizing funds it actually isn't there's a shortage of money the Ministry of Finance of Indonesia said on a panel that I was on this morning that the fiscal revenues or the fiscal receipts here in Indonesia can only fund about 20% of the requirement but what you need to do is to mobilize the money that's around which essentially requires the build out of really two things and simultaneously first of all there needs to be a push to create a pensions industry and a mandatory pensions industry and then secondly alongside that an insurance industry and then you essentially develop bond markets because if you can get people to start saving in pensions and start saving in life products then the maturity transformation is much easier because if you save in a pension you're saving for 30 years the pension fund manager can therefore lend 30 year money for someone to build a bridge a power station, a road as long as the money sits either in bank deposits and is therefore too short term for that maturity transformation to work within the banking system and by definition if it sits in US treasuries it's not actually building infrastructure in Asia so there's an issue of mobilization there's not an issue of a shortfall of money and there are several well established techniques to deal with greenfield sites versus brownfield sites and actually if you're running a pension fund company project finance tends to be an extremely good way of diversifying your risk because project finance whether it's investing as an equity holder in a venture capital way or it's a public private partnership in a greenfield site or it's a project bond tends not to correlate with equity markets it actually provides them with diversification and actually the two countries in Asia or Japan that have done well with infrastructure are Hong Kong and Singapore both of which have effectively mandatory provident funds both of which have therefore created pools of long term money and both of which therefore have been able to build world class infrastructure very quickly what they've also managed to do is to clear all of the red tape to enable those to be built within short order so I actually think the infrastructure requirement of Asia is absolutely fundable because the money is absolutely there but unless that mobilization takes place and that frankly is country by country it's a domestic agenda because what you really want to do is to mobilize the domestic savings here in Indonesia not to be reliant on hot money that from time to time might want to come to Indonesia because QE is happening at the moment in America and dollars are free that gives you that long term sustainable thing it's the creation of a contractual savings industry that's so critical and both Hong Kong and Singapore did it by actually creating a mandatory requirement for people to save for their retirement which then has the beauty of providing to build your infrastructure and you create a virtuous circle. We have a lot of liquidity in the moment in Indonesia like you said the problem is not actually the amount of money it's there Yes it's mobilizing and the maturity which it's preferred to stay for if the money is there short term it's not going to finance a 20 year project. Stuart you're from HSBC and HSBC you know quite big in Indonesia how attractive is Indonesia's infrastructure project so I think they would be completely attractive but they can't be financed by bank financing the roles that banks will play is an intermediary so we'll play a role in terms of pricing project bonds we'll play a role in terms of the risk management of the projects but the end investors have to be people who are prepared to take 20 or 30 year risk and as I say that's the life insurance industry that's the pension fund industry it's not your commercial banks your commercial investment banks will provide the advisory work you know the project and export finance advisory to structure it how to put the project bonds together how to put the PPP partnerships together but they're not the end investors the end investors need to be done and that requires a government initiative and that government initiative itself tends to be a joint venture between government and the banking industry in a particular country and again both Singapore and Hong Kong have done this in the last 20 years Okay I'd like to turn to you now to Maju you see is an investor in Indonesia if I understand it is you're actually building a railway in East Kalimantan to support the co-company there could you tell us Maju perhaps as an investor how is the infrastructure project coming along you're also building a power plant there if I'm not mistaken I mean are there any sort of difficulties in actually implementing the project and perhaps you could share with us we're building 140 kilometer railway track trying to link the energy sorry could you speak closer to the mic is that better we're building 140 kilometer railway track that's primarily to connect the coal mines for export as well as to create other industries within the region hearing a lot of the bottlenecks what we have been discussing here about and what experience we have is completely different probably it's one of those projects which is on the good side of the story we've been here for last three years as a company but we most of our people here the way they settle and the way they work in the project is almost like we've been here for last 30 years I think a lot of the mistake what a lot of the foreign investors do is when they land into Jakarta they first go to the lawyer's office and try to understand Indonesia which is a big mistake because the lawyers give you the completely wrong perception they only talk the negative things of Indonesia and whereas Indonesia is more about what's happening on the ground what we have done is we have engaged the local government a lot we've engaged the local people we've engaged the central government people they have been three years back when we had asked bids for some of the contractors in the region refused to bid because they never believed this could ever happen so then we had to engage the contractors with the local government and the regional government to build the confidence in so it's all about the confidence of each one of those stakeholders because I don't think a railway track can just be built by us you can't just write one check and start buying all the land and everything is done there are various stakeholders in it and the biggest job what we do in the process is that we try to engage all the stakeholders make each one of them keep on meeting that's how I have a lot of visitors for Gita's office regularly I bring US exam I bring GE I bring the I bring the regional governments I have introduced international banks to the Bhupati in the region I mean Bhupati is just one of the regional leaders we have taken to him and the Bhupati hears what the bank wants from an international perspective and then he tries to find solutions for some of the issues which are there and then I bring the Bhupati back into Jakarta make him sit with the central government and try to find a solution and the most of the government which is sitting in Jakarta understand international business it is the local government which does not understand so you go to engage both of them they feel comfortable with each other we have land acquisition is one issue which we have which we have been dealing it on a case-to-case basis this is like golf you know you play shot by shot don't try to play all the shots in one shot so we go piece by piece one by one each and every department has got a different issue you go to handle them in that specific manner the good thing in land acquisition is I can tell you probably it's in India the difference between Indonesia is that the difference in the political parties is only during the election time when it comes to development and finding a solution it really doesn't matter which political party the regional government is or the central government is they don't really they all meet and they talk that's a good thing you know the second thing is with regard to the policies letting you build your own private railway is the biggest opportunity you could ever get in the world you can't do it in Australia, you can't do it in Colombia, you can't do it in US it's a fantastic opportunity there will be challenges going forward but we see it as a big opportunity for us there is nowhere else in the world even in India you build your own railway track you build it and hand over it back to the government so we see that as a fantastic opportunity and we would like to you know get involved and face the challenges rather than just running away from the challenges coming to the approvals there is a solution for that too there have been problems of approvals forever but couple of years back when I sat with BKPM officials and I said I will do the land acquisition I will invest the money but what are you going to do with the approvals they gave me a confidence again it's all about the confidence what you build with each other and the trust you build with each other you carry on we will find your solution last month they have announced our project in the nine special corridors if two years back or three years back I was waiting for that announcement to come we wouldn't have progressed where we are we have been announced our project is part of the nine special corridors where the president has given instructions to all the ministries to give special clearances to these nine projects and I think these nine projects have been selected on certain basis of certain development which is already done so I think it's more of guys who are already committed we push them first and we are getting our approvals may not be as easy as it is but it's moving it's always important to move not just get stuck somewhere and it may move slowly because the country is big so like I said we have been here for three years but we feel that we have been here for 30 years we are very comfortable we walk into any government office like any other local company and we are engaging the international financial community different stakeholders with the local people and making them understand the different challenges and start accepting those challenges and start build trust with each other so you are saying you are quite happy with that kind of process we are very happy because you don't want to see anything that have changed but how long did it take MEC from the blueprint of the project until the implementation the blueprint was made in 2008 first quarter of 2008 2009 second quarter we got our railway license and after we got the railway license we took us about one and a half year we have acquired 95% of the land one more thing is that we have not sat in Jakarta and kept telling the government you buy the land I will build the rail we didn't do that because the government has got other things to do they've got you know social security they've got other things to run here what we did was we went in on the ground started engaging the local villagers and started talking to them we actually made an animated video of what the project will look like five years down the line if the railway was built and these are villagers who when they see the video they like it, they start supporting you when you have villagers support automatically the government will support you when you have the government support not necessarily the villagers will support you that's the difference so it sounds like a good example because land clearance, land acquisition is one of the biggest problems in this country with acquiring land or with I think most of the land equation problems are in Jakarta, not in Kalimantan or South Sumatra and I think there are opportunities in these regions also the business is not only in Jakarta the business is all over Indonesia and you need to go into the areas where there is not enough competition or probably it's because of the competition land acquisition becomes difficult not necessarily because of government policy so I guess in Kalimantan there are a lot of opportunities in the region and not much competition so you can go into those areas it's good, it's nice to hear a positive example of infrastructure being built in Indonesia but if we talk about infrastructure of tomorrow John, obviously when we build infrastructure we hope to also build to solve the problems of tomorrow and the problems that we have at the moment for example the environment with getting clean water using renewable energy and so on and so forth and because you're from GE as a global company would you see the main challenges of building and financing infrastructure of tomorrow? Well I think we if you think about it from our perspective we have to keep investing in innovative technologies that bring the cost of delivering these capabilities to market lower and lower so if it costs 90 cents a cubic meter to take the salt out of water we have to figure out how to make it 80 or 70 cents we have to figure out how to get affordable health care technologies to remote villages that don't have power so that's a handheld ultrasound that is battery operated it's all sorts of capabilities that didn't exist yesterday that some of them exist today and some will exist tomorrow and we can never stop doing that it's also figuring out how to connect capital with these big infrastructure projects because there is lots of money in the world that is interested in investing some of it can find projects easily and some of it can't and we have a responsibility to help with that I really agree with what Dominic talked about in terms of government's responsibility to create a level playing field and establish rules that are consistent and allow you to see forward a couple of decades because if you're investing in these big projects you don't want to think that the rules change the next time the government changes and sometimes they do and the fourth thing I'd say and this is not something that we talk enough about but and like all of you I travel around a lot and I'm in a lot of countries where the governments just don't know how to get big projects tendered you know it just takes too long it's not transparent and it you can have all the capital in the world you want you can have great technology but if you can't actually get the bidding process done then you're not going to then this these trillions of dollars isn't going to get spent or it's not going to get spent soon enough and that's where I think companies like GE and McKinsey and can help create procurement standards which give governments the confidence to move forward with these projects and talking to the Indonesian government about this we talk to everybody about it because it's hard it's complicated the process gets politicized so I don't want to be naive about it it's not something you can tomorrow but it's true and let me tell you the western governments don't necessarily have it figured out either so it's versus east but if you I believe that there are great technologies which can be brought to bear to solve problems today there's capital that wants to find these projects we got to make the system we got to grease the system a little bit to make it work better so that we can get some of this stuff done I'd like to focus on the actual types of projects that Indonesia for example should prioritize infrastructure we also talk about access to clean water for example and power and so on and so forth what would be really good projects for Indonesia to prioritize well I think distributed power is important in Indonesia you have people living on 6,000 islands you've got 15,000 or some number in total you've got an electric grid which will be very difficult to reach all these people and so power units in smaller block sizes for lots for remote villages are perfect opportunities to solve that problem or at least help it while you're waiting to push the grid out to people who need it and I don't think a problem that's unique to Indonesia if you look at Africa there's a billion people on that continent probably 500 or 600 million don't have reliable access to power and it'll be a long time before the grid reaches them too so it's a similar phenomenon so smaller power block sizes power blocks that can run on biofuels or non-natural gas landfill methane coal seam methane and things like that all those technologies are available today and can be used to help by Gita last but not least by Gita and we've been on these sort of infrastructure sessions quite a few times and I always ask him the same questions basically when is it going to happen basically and what is happening with the infrastructure and these these are questions that I've been asking you know five, ten years ago so tell us about Gita will we see you know new roads soon we'll see power plants being five years ago I was on the other side of the panel and I was the one asking questions look I'm I'm an optimist and I think many people have known me as an optimist and let me continue being optimistic today but before that I want to I want to just recap some of the the challenges that we go through I think Stuart was was so correct in pointing out the limitation from a funding standpoint and that's not just by virtue of the absence of a mandatory system for people to basically put money in a bucket that would be funneled to long duration instruments you know the pension funds and all the other funds that are here in Indonesia the local ones particularly the state owns their liquidity and it accounts to about 40 billion US and a good chunk of that if not most of that is placed in no longer than 12 month deposits not because these guys don't want to but there is no proper instrument that would have been created to support the funding and the financing and I think we're taking the view to basically change that I'm not saying that we will brighten up tomorrow from a funding instrumentation standpoint but I think something will happen in the next 12 to 24 months now if we look at the regulatory side of it I think the one thing that would be a major value unleasher or game changer is the land law which we haven't been able to get for 25 years and this land law is something that has been pushed to the parliament in the last bit of December last year and I've been called by parliament a few times to testify and give my views about the world and how that would be useful for Indonesia and Indonesians and I think from a body language standpoint they are I think leaning towards agreeing with how it should be done but I think that's you know hospitable to the investing community from Indonesia and outside Indonesia and I'm willing to wager a bet that this thing is going to come out either in the third quarter or fourth quarter the beauty about this is it's that it's going to you know provide certainty with respect to timing and pricing the third impediment thus far has been wanting to do too much with too little bandwidth that's the temptation and the tendency for bureaucrats in any country they want to do too much in too little time and the problem we've had in the last 12 years is whenever since we started talking about bureaucrat by the way 12 years ago we started tinkering with the idea of PPP public-private partnership and nothing got done until recently and 8 or 9 months ago I made the point very vocally to the cabinet that there needs to be some game changing here and there needs to be a separation between planning and execution and guess what we signed the MOU with the minister of finance and the minister of planning and I told everybody at the cabinet that you know I'm not interested at all in telling the world that we want to be promoting 50 to 60 different projects I want to just be telling the world that we want to do just one project and guess what we were forced to come to compromise of outlining or announcing five projects within the PPP basket and one of the five got done two weeks ago this time in 12 years and this is the central Java power plant power generation capability two times 1,000 megawatts this was you know bided by two Japanese and two Chinese and this would have been possible mainly because the government took the view to basically provide a government guarantee which you know the government had never wanted to give the government guarantee to anybody that wanted to do so we did it so we've delivered the baby and the next one that we have gone involved with packaging and promoting and all that is the Umbulan water treatment project which has been pending only since 1968 okay this was just about the time when Sukarno was going down and you know Sukarno was the first president of Indonesia and we took over and we made sure we sat down with the bupates the governors the parliamentarians at the regional level and of course all the relevant ministers in Jakarta and guess what 29 expressions of interest from really reputable names from all over the world and we've shortlisted the names to I think 7 or 8 and this is highly likely to get done this year so the message I want to convey is that yes it's messy thus far but there is hope because there is these little steps that we're taking you know we got to continue thinking big and doing small and doing now and this is exactly what we're doing and I have complete confidence that we'll be able to get the two done this year so we can move on to the other three out of the five that we announced a few months ago and the other five are basically the rail link between Mangarai to Sukarno Hata and the toll road in Kuala Namu to Medan and last bit is a simple cruise terminal in Karangasam in Bali I think Karangasam is a much more doable item compared to the other two remaining and this we've basically sat down with the bupati of Karangasam this is on the eastern coast of Bali it's a 40 to 50 million dollar deal for a cruise terminal to be built but this is something that has been highly highly demanded by people in Singapore and Hong Kong who wanted to have a hub in the eastern part of Indonesia so that you know the travelers from the US, Europe and Asia-Pacific could see the beauty of the eastern part of Indonesia I think this has got a good chance of happening my point yes we're not building as many kilometers of roads as the Indians and the Chinese are by the way the Chinese came to Indonesia in 1992 to learn how to build toll roads and we taught them and guess what ever since then they only built more than 70,000 kilometers of roads and we've only built 500 kilometers of roads since we taught the Chinese how to do it and it's it's predominantly because of the three impediments that I've outlined but you know it's not an impossibility but it's an expectation perseverance for purposes of basically just sitting down in some remote regions and you know John aptly pointed out the tender regulations you know what after or at the same time with the promulgation of the land law I think we'll be able to complete the revision of presidential decree 13 and this is the impediment because this decree basically tells a bit for an infrastructure project we've got to receive at minimum three bits and this was cutely crafted by some really smart guy in the government many years ago and guess what we ended up getting 27 bits from you know all the relatives and friends of every bureaucrat in town with no financial and technical work with all in the end we ended up not being able to deliver I would rather get a bit or take a bit from Astra or a GE you know knowing that there's no question whatsoever with respect to and of course with Ajit also who's qualified and Madhu would respect to their technical and financial work with all as long as we know what this project is going to be worth if it's going to be worth $100 $101 so be it let's accept it and if there's no other bits get it done what happened in the past 10 15 years we got so many bits we couldn't get going and we would review review review and we would go to the second round and we only got two bits you know a drop from 27 bits to two bits and we would review review and we would decide to terminate the whole process by that time it's already eight years that's the reality because people don't have the understanding of how a typical transaction ought to be structured and how a particular package ought to be promoted to anybody who has keen interest in stuff like this so it's happening the small steps are being taken and I think we will have an MRT in Jakarta before I die I hope so I hope that answers some of John's frustrations but before I turn to the audience let me just ask you one question about this the land issue regulation or law when this comes out how will it work how does it work and how basically it's very very very simply it tells people that you go out there and try to do it yourself but if and when you cannot succeed this could be six or twelve months we're in the process of setting the threshold the timing threshold the government will intervene and buy the land take over the land and buy law so people will have to and will be obligated to deliver the land to the government at a price which will be sensible and sensibility comes from some sort of benchmarking which could be benched against the underlying tax base of the land or some mutually agreed upon price between the government and the private sector but this is a much better level than where we have been in the past 25 years and you think you're confident that it will work oh yeah for sure I'm not worried about the money people get it about Indonesia Indonesia fiscally has been so prudent you know we can gloat to the Americans and the Japanese, the Italians and the Portuguese about how we've been prudent on our fiscal management 26% debt to GDP ratio we can gloat about our monetary you know stability you know having managed inflation in an effective and efficient way we just need to tell the people that hey look we've got some sanity in the way we process things I would now like to invite questions from the audience could you please identify yourself and who you would like to address the question to and where's the mic anybody yes there's a gentleman over there hi my name is Vikas Porta I represent GEMS Education I suppose this question is to Mr Gulabchand and to Mr Coneru in particular it's to do with in the west in particular when we speak about bottlenecks in infrastructure the issue that you've picked on is land rights but we're often asked about climate change and as manufacturing companies or infrastructure companies in this part of the world how much of a bottleneck is that lobby well at the present moment it is a very major bottleneck land acquisition and price and compensation for it for eminent domain under a big question is this for a public purpose when it is going to be finally managed and undertaken by private sector are you handing over public property under the name of eminent domain to a private sector investor these are questions that are being asked and raised in addition to that India has one more complication is we have what is known as agricultural land and non-agricultural land whenever land has to be used for other than agricultural purposes its land use has to be changed and the moment you change the land use there is a legitimate question then who should be the beneficiary of that change the farmer whose land it has been changed should it be the developer who is coming in to develop that new infrastructure project and then should it be the government who is obliged to provide the infrastructure to make sure that this land becomes usable these are questions that are still not getting adequately answered some piecemeal answers to finding a price for it have come up but it has never remained satisfactory because it does not really answer these questions besides what is the land needed for more industry and how do you acquire for industry that should it be under eminent domain and if not then how does industry get new land these are issues that are today really on the debate in India and some legislations have been passed by say for example the UP state government the central government it is begging this legislation and still not come through with it I think we are going to be in the midst of this turmoil of this debate over the next year or so at least before we come down to a conclusion what would be the fair price of land particularly and for what should it be fully acquired by government and what should be left for entirely private sector to do so it's not a simple problem it needs to be resolved it needs to be done but it has to be constitutionally acceptable it has to be acceptable to the public at large that it was fair these are some of the issues we face and that the land values after such new infrastructure coming in changes so much that even the farmers who have sold it ten years ago want to come forth and say we got a price that was much less than we should have got we should also be made beneficiaries even though we sold this land long ago so these are issues of course this is wrong but the fact is that TV did not know this was going to happen there was no laid down policy this is how it will be done and then the courts tend to hear that please therefore we have a question here and I hope that in the next next year or two maximum we would be able to come to some policies this is again compounded by the fact that there is a central subject and land is a state subject but getting agreements here are not easy but the fact is you still get one kilometer of road per day built in India but that's a lot of as I said it's a mix look he's an optimist I'm an incorrigible optimist I continue to invest in construction concessions and in city developments in spite of being a victim of all the problems I've said so the fact is that it still goes on India is an optimistic story but it does have these problems Good day my name is Denim I'm from a company called SNC Label in out of Canada we invest in infrastructure concessions around the world and in fact we are an investor in India in both the Mumbai Metro phase 2 MRT project and most recently a road project in India and we find India is greatly improved if you look at the land issue the road we invested in was under federal law where the federal government guaranteed that 80% of the land would be available at financial close and that the balance of 20% would be available within 30 or 60 days of financial close and these are the kind of guarantees that are required to bring in investors like us we find looking around the market that there are countries that are ad hoc and the deals come out and they are structured every which way there is countries like Brazil that have structured their terms and conditions of their concession agreements to favour national firms they really are not tailoring them for international investors and then there are countries like India that have made a big effort in power and in roads to attract the infrastructure investors like us and also the big pools of fund money to come in and participate in the larger projects in India and I think my advice to countries is this is what you have to do you have to benchmark your practices against other countries if you look at a port project we'll get a port project on a given day a port project in India a port project in Indonesia and one in Peru and we were basically comparing jurisdictions to see which offers the best risk return ratio and that's where the money goes and really this kind of benchmarking is very important and perhaps something like the world economic forum can even help countries benchmark their best practices benchmark their terms and conditions and help them tailor them to really attract the big pools of international money which are out there and where there is plenty of money for infrastructure out there if the risk return equation is right and I must admire Chakraborty commission in India Minister Kamal Nath who among other things decided people have to make money if infrastructure is going to work as a private investment the investors have to make money once that gets accepted that does light the way for a lot of the changes that have to be made in the terms and conditions of these concessions thank you very much any of the panelists would like to respond to the comment with regard to the practical side countries like India Indonesia is that you need to get that one story right the first one there are a lot of opportunities again I'll give our project as an example when the license regulation for private investors was issued in 2009 we were one of the first people who applied we got it but there was no second application until first quarter of 2011 in first quarter of 2011 there are three projects which have been announced one in Central Kalimantan and two south Sumatra private most of the investors were primarily waiting to see how our project is developing once the project was they've seen that there's a progress in our project they all have started applying so right now there are four private railway licenses which are being developed in Indonesia any more questions my name is Fauzi from Standard Chartered Bank my question to anyone from the panel is that many of the existing investors in the infrastructure for example the private operators of tap water have issues regarding the flexibility of tariff i.e. when they come in they thought that raising tariff over the next 10 to 20 years throughout the BOT period would be relatively straightforward but it's not and they get frustrated and the projects often are under water and how can we ensure that investors who come in have that flexibility or certainty on how to raise tariffs in the future I think this is a great question because it is highly relevant to a lot of the investors that have invested particularly in the port sector container terminal and all that but as much as we are keen on giving the certainty that at least there is not going to be any declination of tariff you know this is a politically sensitive issue which you know the ministry of transportation would have to run by the parliament and typically parliamentarians are the ones that are gesturing and conveying the sensitivities in respect to the elasticity of this new pricing mechanism but this is all going to not disappear but I think is going to come down as the economy grows and as purchasing power grows and welfare grows and widens and it is happening already in Indonesia by virtue of the yardstick of poverty index and the GDP size and all that I think going forward we may not have much or as much an issue as we have had the past 12 years we privatized the port in 1999 to a large conglomerate based in Hong Kong and I know when they came to Indonesia they would have wanted us to give some kind of assurance that tariff would be recalibrated every so years upward not downward and this made life difficult for a lot of the policy makers because as you know the early part of the last 12 years were very very difficult times for us economically from a fiscal and monetary standpoint but I think going forward as the economic pie grows I think we would be in a better position to at least assure that there is not going to be any much sensitivity on raising tariff going forward having said that we are not in no position we are not in any position to give certainty on a periodic tariff hike that perhaps some investors have voiced Dominic would you like to go on I would agree obviously with what you are saying but I think it gets to me back to this brown field issue again too which poses uncertainty one idea may not be a very good one but we have often wondered if you got a group the Asian development bank or this can work in some countries which comes in as a small part player but because they are involved in other loans that there is some surety that investors that go with them are not going to be affected by something because what people worry about is with the government change I think that is the issue and is there some way to put some sort of a guarantee in that again there is all sorts of issues probably with that but that I think is a big factor because who can tell who is going to come into government and as everyone has been saying it is 20 to 30 year money that could wreck the value from it you know it strikes me that there is kind of a tension here between capital that can go anywhere and needs to have the right risk adjusted return to come here with some view that that is going to last for more than 18 months and the perception that can be created that this is about rich people getting richer and rich companies getting richer and wealth being exported to other places and so for all of us that do work in developing countries with that perception for us we have to think about bringing in local capabilities and creating whether it is training or service or manufacturing because that is our way to avoid the perception that this is about us selling expensive power equipment or locomotives and making shareholders wealthier in other countries and so we have got all the investors I think that work in a country like Indonesia have to deal with that perception and we all want to make a good return on our investment and satisfy our shareholders so it is a it is a legitimate tension that we see in lots of countries what are you actually doing in order to perhaps change that perception all but we have to be local we can't 20 years ago you could fly in and sell a jet engine and leave and ship your engine in and get paid and live happily ever after and that day does not exist anymore we have to be working with Garuda on us on service we have to be have capabilities to assemble and service locomotives that has to be increasingly that has to be done here not someplace else because for us to be successful we have to be viewed as a citizen of Indonesia not a global company trying to export wealth quite frankly I think it is also exactly the same point but in a different way it is also why you want to develop your domestic capital markets because whilst you absolutely want international investors like yourself who are reviewing Peru, South Africa of China and Indonesia on the same day you want a raft of people who are Indonesian basically the investor of last resort in any country is domestic and it tends to be its domestic insurance and pension fund industry that domestic investor is going to have greater empathy with the local situation it's also from a positive point of view on your point about tariffs how do you influence through the normal local processes the change in attitude towards those tariffs in a way that is not seen as predatory and foreign as benefitting so the development of domestic capital markets is really critical to sew both of these pieces together and how do you see Indonesia's domestic capital market developing the last few years I think that there is absolutely a recognition I think it is clear from what you were saying that that needs to take place and there are obvious there are no children for this around the rest of Southeast Asia so I think to some extent one is pushing on an open door but you shouldn't underestimate the degree of difficulty of putting together the entire infrastructure to do it go ahead if we take a look at our market cap the stock market it is at about 380 billion US compare that with our GDP of 720 it runs at a ratio of 1 to 2 or 50% compared with the US the ratio is 1 to 1 because their market cap is around 14 trillion to a GDP of 14 trillion which tells everybody that there is still a lot of upside here to go and that would have to involve encouraging as many companies as possible to get listed and as to encourage more liquidity from some of the stuff that we have talked about earlier and if there is one thing that you all can do to help you know further enhance the investment thesis of Indonesia it is education and I think you guys from the corporate side of the game should really be proactive in looking to support government in Indonesia and that could mean sending a government official for a 2 week program somewhere what you want is for these guys to see the world you do and this is exactly how we have been doing it I have been in the private sector for a long time and when I go to Papua when I sit with the governor Papua or the bupatis of Papua they don't read the Wall Street Journal and they don't see the burden of proof is on me to make sure that they get it the way you get it and it can only accelerate the mediation the bridging of the two sides and I tell you it is going to boil down to how the regional leaders are going to view on some of the infrastructure projects that are going to have to be built in their regions even if we have a land law to understand the land law or the implementation of the land law the way we want them to it is still going to be a timing factor so I think education is key here we have one more questions let's just gather three at the same time because we don't have much time gentlemen there with your question and then gentlemen over there and then we have the third one thank you Sandeep from Barclays Capital for the infrastructure here but if you look to the US and the West New York hasn't seen any significant up-tiering of their infrastructure for a long time or the US is there an opportunity and to steward to your point there is the capital from QE2 there are the institutions the pension funds, the insurance with the longer term capital is there a huge opportunity within the infrastructure world to up-tier infrastructure in the US and will it happen I think the kind of sweet irony in all of this is that a number of the Asian sovereign wealth funds looking exactly at this which is investing in the infrastructure of the United States so I think this is sort of a political or design issue within certain Asian governments as to where actually they want their surplus funds to go because that really is happening and that really is getting studied and yes that will be an area in which capital is put to work and there is a substitution level both at the Asian sovereign wealth fund but also in terms of other investors in the sense that you have got several of the issues that have been talked about in terms of legal certainty title of the land, all of that is actually quite straightforward but yeah, the US one of the ways the US will stimulate its economy and create a whole load of jobs of people earning $50,000 to $100,000 a year is rebuilding its infrastructure My name is Pierre Coherd I'm the president of Goodyear for Asia Pacific and I would like to bring a testimony about the work that BKPM and the Gita are doing in Indonesia. We have been doing business in this country for 76 years. We opened back in 1935 one of the first large scale manufacturing site in Bogor and ever since we have expanded it and modernized it today we make work less tire that are exported in 52 countries including in China which demonstrate that many in Indonesia can compete in China It is a 24-7 factory and the challenge we face is for the past seven or eight months we are losing power one and a half day on a monthly basis which means that we lose power about 5% of the working days we have and if you think about rubber, hot rubber it sticks so when we lose power it takes us a long time to clean some of the pieces of equipment that we have We are waiting for the power station to come up in line it has been suggested to us to run some massive diesel generator which are very noisy oil thirsty and of course it is not too good for the carbon footprint so we cannot wait until the PPP comes on board and clearly if you think about what a 5% loss in the top line with the gearing does to your bottom line there is a lot of incremental jobs and tax revenues coming to Indonesia once we can have guaranteed supply and power look I mean we have crafted this plan for the next five years to basically build 20,000 kilometers of roads and 10,000 megawatts of power generation or 15,000 megawatts of power generation translating to 3,000 megawatts per year and railroads ports and airports for which we estimate we will be spending about 160 billion US which we have allocated fiscally about 60 billion US so right there the delta of 100 billion would have to come from the private sector and that money is not going to come until and unless we get a rack together in packaging the transaction and I do believe with the recent development on power generation and central Java I think we will be able to deliver the 15,000 megawatts and I think you can start planning for the next three years in Indonesia I'm afraid I have to wrap up here as we find out a time and apologies to those who want to ask questions but don't have the time but lots of issues, lots of challenges when it comes to implementing infrastructure but there is light at the end of the tunnel we still have to fix the regulations, the land issues the financing and develop the domestic capital market as well as educated local government officials and with that I would like to close the session, big hands to our panellists John and I thank you very much I hope it's been useful enjoy your stay in Jakarta thank you