http://online.wsj.com/public/article/SB116276780695713912-cbVoKRhv0cOFncx37ZMDrWtZbKA_20061112.html?mod=regionallinks

JAKARTA, Indonesia -- Indonesia's efforts to get delayed infrastructure projects off the ground inched forward as foreign and local investors at a conference here were encouraged by a government pledge to offer financial backing for private investors in state-sponsored ventures.

Whether that will translate into new tie-ups between private companies and Jakarta to improve Indonesia's decrepit toll roads, ports and power plants, investors say, will become clearer over the next few months.

"The foundations for future projects are potentially there," says Karin Finkelston, associate director for East Asia at the International Finance Corp., the World Bank arm for lending to the private sector. "The key now is how this is implemented."

In January 2005, President Susilo Bambang Yudhoyono's government began an effort to persuade skeptical foreign investors and international donors to get involved in a number of major infrastructure projects. But the plan foundered, largely because Jakarta refused to offer financial safeguards that investors demanded to lower the risks of doing business in Indonesia.

At an investment conference last week, the government set out a number of fresh initiatives, including financial guarantees, that it hopes will lure some of the foreign investment that is flowing to Asian rivals like India and China. Indonesia is widely perceived as a difficult place to do business because of Byzantine bureaucratic procedures, unclear legislation on investment and corruption in its legal system.

Without a turnaround in stagnating investment levels, Indonesia's economy is unlikely to grow at the rate of about 7% a year, which economists say is needed to create enough jobs and reduce poverty. The country's inflation-adjusted gross domestic product is forecast to expand 5.8% in 2006.

At the conference -- where hundreds of domestic and foreign businessmen mixed with international donors and government officials -- Mr. Yudhoyono appealed to foreign investors to help supply the $22 billion Indonesia says it needs to spend annually in the next few years to upgrade its infrastructure. "The government will provide only part of this funding," he said, "while the major portion will have to come from the private sector."

Officials highlighted 10 projects with a total value of $4.5 billion the government hopes will become models for private-public deals and pave the way for other investment. They include power plants, toll roads, water-supply projects, fiber-optic networks, a ferry terminal and a port.

Finance Minister Sri Mulyani Indrawati outlined a plan to earmark $450 million from Jakarta's 2006 and 2007 budgets to fund financial guarantees and offer other support for the projects. Investors have been demanding these guarantees, which are meant to cover the risk that state-owned companies like PT Perusahaan Listrik Negara, which runs the national electricity grid, could break contractual agreements or default on payments.

Also unveiled at the conference was a separate $300 million fund for government purchases of land for infrastructure projects. Poor land documentation in Indonesia has deterred foreign companies from investing in projects such as toll roads for fear of getting bogged down in legal disputes with property owners. While the moves drew praise, many investors say they want more detailed information about projects before they commit money.

"The government has shown strong determination to move forward," says Muhammad Fadzil Abdul Hamid, business-development manager at Plus Expressways Bhd., a Malaysian toll-road operator, who attended the conference. "But we still need concrete evidence," he adds, that toll-road projects will proceed without legal wrangles involving land.

Investors say success will rest on the government quickly getting some model projects up and running. "One or two projects would really open the door" to further investment, Ms. Finkelston says. For now, she adds, it remains unclear exactly how the tendering process will work.

Some projects, including two toll-road-extension plans, are closer to being ready than others, the government says. At the conference, Ms. Sri Mulyani admitted some projects have "not been prepared to the standards expected by international investors and lenders." To improve the situation, the finance minister said, the government has created a panel to focus on preparing projects to international standards.

Lack of clear information on projects is a major problem facing private investors, Lawrence Greenwood, a vice president of the Asian Development Bank, told the conference. The government's lack of experience in preparing, tendering and implementing projects is an additional worry, he said.

Rivalry between the central and local governments -- which have won a greater degree of autonomy from Jakarta in recent years -- also could complicate efforts to get projects under way, investors say. Highlighting this fear, regional governors and mayors organized a parallel investment conference in Jakarta last week, but investor turnout was more modest.