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Land acquisition bill a silver bullet?

Jakarta Post - April 26, 2011

Hasyim Widhiarto, Jakarta This is the second of two reports on land acquisition fiascoes hampering the development of key public infrastructure projects that are badly needed to help the Indonesian economy expand. With no immediate measures in place, no definitive end is insight. The Jakarta Post's Hasyim Widhiarto explores the issues:

The much-awaited bill on land acquisition is widely expected to miraculously be a silver bullet that would end all hurdles impeding key infrastructure projects. Some activists, and businesspeople, however, remain cautious over the success rate of the bill if it were realistically enforced.

The government proposed the bill in December to the House of Representatives, suggesting not only acceleration of infrastructure development, but also reinforcement of investor confidence by removing all uncertainties in the sector.

For example, under the bill the government would handle the acquisition of land needed for construction of, among others, infrastructure related to education, dams, irrigation, landfills, state hospitals, railways, roads and highways, before opening up a project tender.

Under the bill, the government will also assign a team of independent appraisal to value land prices. However, the price deal is subject to be finalized through negotiation between landowners and the government.

The bill also grants district courts with authority to arbitrage land acquisition disputes within 30 days. The court verdict will be considered final and cannot be appealed in a higher court.

Speaking before participants of the Indonesia International Infrastructure Conference and Exhibition 2011 earlier this month, Coordinating Minister for the Economy Hatta Rajasa said the government had contemplated the proposed law as crucial and was upbeat to see it ratified by July this year.

"We have also seen a strong commitment from the House [to ratify the bill on time]," he said.

But skepticism remains. Indonesian Toll Road Association chairman Fatchur Rochman questioned the absence of key articles stipulating the settlement of financial disputes between banks and investors engaged in public infrastructure projects.

"I think the bill needs stipulation regarding whether it's allowed or not for banks to take over an ongoing project from investors in case the later defaulted on their loans," he said. "It would be unfair if the government allowed banks to confiscate the project and leave the investor with nothing," he added.

Indonesian Chamber of Commerce and Industry deputy chairman for infrastructure, construction and property, Zulkarnain Arief, believed the bill alone would not significantly attract private sector investment to the country's infrastructure potential unless the government provided reliable financial back-up.

"Aside from enforcing the law [after it is ratified], the government can attract more investors by urging state banks to provide public infrastructure investors with long-term loan options and competitive interest rates," he said.

The National Development Planning Agency (Bappenas) recently estimated private sector funds needed for transportation facilities alone reached Rp 51.7 trillion (US$5.8 billion) a year, with electricity infrastructure costing another Rp 41.2 trillion. The Public Works Ministry last year said they wanted at least 125 kilometers toll road constructed annually by 2014.

The target, however, seems to be very difficult to realize because all 24 priority toll road projects in Java, which make up a total of 949 kilometers, have been idle since 2007 due to soaring land prices and construction costs.

To ease the problem, government has thus far issued last year a presidential regulation on land acquisition that stipulated, among others, the government's role in land acquisition prior to project tender. The regulation is a revision to a previous regulation issued in 2005 and 2006, which failed to include mechanisms on land price negotiation.

Contacted separately, Toll Road Authority Agency (BPJT) chairman Achmad Gani Ghazali Akman guaranteed the bill would help expedite infrastructure development, as it would give more certainty to investors in planning their schedule for their project construction.

Indonesian Democratic Party of Struggle (PDI-P) legislator Daryatmo Mardianto, who leads the House's special committee deliberating the bill, said the committee was upbeat to pass the bill on schedule by this year since it had successfully run a series of hearings with non-governmental organizations (NGOs), agrarian experts, related ministries and state owned companies during the past three months.

The committee, according to Daryatmo, had also completed working visits to Aceh, Bali, North Sumatra, North Sulawesi and Papua to seek insights from both local government and community leaders.

"From the hearings and working visits, most of our sources have demanded us to elaborate several points in the bill related with basic definition of public interests and land acquisition," he said.

Starting next month, the committee, according to Daryatmo, will run a series of hearing with, among others, 25 governors, the Supreme Court chief and several other state-owned companies. "Since the law is also regulating land acquisition for security purposes, we will also invite the military and the National Police chiefs in our upcoming hearing," he said.

But Agrarian Reform Consortium (KPA) is not impressed with bill. The KPA is an NGO engaged in advocating land dispute and agrarian reform. KPA chairman Usep Setiawan criticized the bill for scrapping the public rights to appeal the court verdict on the land acquisition dispute, saying the rule had violated citizens' right to follow a fair legal proceeding.

"If the House insists on passing the law, the government will finally have a greater power to evict citizens, particularly the poor, under the name of development," he said, adding that the KPA was ready to file a judicial review, should the bill passed with such stipulation.

Several key articles in the bill

Article 13: Land acquired for public interests are those needed for the construction of:

a. Public roads, toll roads, tunnels, railways, railway stations and train supporting facilities.
b. Dams, irrigation, water sanitation, clean water and waste-water treatment facility and other forms of irrigations.
c. Ports, airports and bus terminals.
d. Other kinds of projects for public purposes will be regulated by Presidential Decree.

Note: There is no clear definition of public interests. The government has the authority to classify the kind of projects considered to be within the public interest. Activists criticize this would legalize government actions to evict poor people.

Article 42 (3) the District Court verdict is the first and final in land acquisition dispute.

Note: The article eliminates citizens' right to appeal a verdict to a higher court.

Article 45 (2) Residents must hand over legal documents of their land before receiving payment during land acquisition procedures.

Note: Most land owners in Indonesia, especially those living in remote areas, have not obtained any land certificates due to various factors, including poverty and lack of knowledge in demanding for certificate. Such requirement would potentially harm citizens' rights to receive a fair amount of payment for their land.

Land clearance facilities

1. Land capping

2. Land revolving fund 3. Land freezing Source: Transportation Ministry

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