Indonesia sets up Land Bank to boost infra plans

Indonesian President Joko Widodo has put forward a plan to set up a “land bank” to support his infrastructure reform framework.

Indonesia’s Finance Minister, Bambang Brodjonegoro, confirmed last week President Joko Widodo’s plans to create this year a land bank to accelerate funding of major infrastructure projects.

The decision came days after fuel subsidy cuts expected to save the government some 230 trillion rupiah (€15.4 billion; $18.0 billion) were made official and shortly after members of the newly appointed executive announced new land acquisition legislation.

“Beginning January 1st, a new land acquisition law for public needs will be in place,” Indonesia’s Vice President Jusuf Kalla had declared to local press in early November last year.

The government plans to double spending on transportation from last year, said Energy and Mineral Resources Minister Sudirman Said in the same interview.

According to Brodjonegoro the bank will be managed by three ministries – finance, public works and transportation – but no details have yet been disclosed on the way it will operate.

The Finance Minister added that he would simplify the development process for state infrastructure projects, will review fuel policy in two years, and will look at oil prices and gasoline supply in assessing the policy, international press reported.

Legislative provisions currently limit land acquisition processes to 382 days and have been widely criticised by the industry as too long.

In a phone interview given to Infrastructure Investor today, International Financial Corporation country manager Sarvesh Suri explained he had made recommendations to the government last year to create an agency for land consolidation as, too often, land occupants were not the registered owners, significantly slowing down the land acquisition process. According to him, the government’s plans should remedy this problem.

The World Bank gave poor ratings to the land acquisition programme in its Land Management and Policy Development Project for Indonesia report issued in March last year, judging outcomes unsatisfactory and the risk to development outcomes as significant. It stressed the failure from ministries to cooperate efficiently to implement the December 2012 land acquisition law.

“In a country like Indonesia, where the institutions bearing on land rights are poorly defined and not transparently administered, the priority needs to be championing legal and policy reform; in these circumstances, a project that pays less attention to reform than to land titling is unlikely to lead to a sustained increase in tenure security,” noted the report.