Indonesia needs US$100b for infrastructure development<\/p>\n
JAKARTA (JP): Indonesia will need some US$100 billion in
\ninfrastructure development to meet the demands of its growing
\neconomy, an analyst said on Wednesday.<\/p>\n
Business information provider Strategic Intelligence said the
\ngovernment should encourage the development of infrastructure,
\nsuch as water, power, telecommunications, roads, airports and
\nharbors, which virtually stopped during the economic crisis.<\/p>\n
Chairman of Strategic Intelligence Scott Younger, said in
\n1997, prior to the crisis, the National Development Planning
\nBoard (Bappenas) had estimated a total investment need of US$150
\nbillion in infrastructure development to sustain the then
\neconomic growth of six percent.<\/p>\n
Younger said he expected the private sector to spend some 70
\npercent to 80 percent of the estimated US$100 billion in
\ninfrastructure investment.<\/p>\n
\"In the past, one assumed that the domestic market would fund
\npart of that investment, but at the moment the domestic market is
\ndormant,\" Younger said following a news briefing of his company's
\nupcoming investment seminar.<\/p>\n
The two-day seminar, titled The Indonesian Government &
\nBusiness Investment Forum 2000, will be held at the Borobudur
\nHotel on March 29.<\/p>\n
Younger predicted that domestic banking institutions would
\nstill be unable to provide funding for infrastructure projects
\nfor the next two years.<\/p>\n
Younger said the government therefore played a vital role in
\npreparing the financial grounds for infrastructure development,
\nestimating that the banking sector would then engage in serious
\nlending for infrastructure projects by 2002 or 2003.<\/p>\n
He said foreign investment would initially drive
\ninfrastructure development, while the domestic lending
\ninstitutions would catch up.<\/p>\n
However, he said, foreign investors would only be attracted if
\nthey saw a reasonable rate of return in investment.<\/p>\n
Younger said this would leave the government considering how
\nmuch in foreign loans it would set aside for infrastructure
\ndevelopment.<\/p>\n
Younger said much of the infrastructure investment would go
\ninto the energy sector.<\/p>\n
He said the industrial sector relied too much on cheaper
\nsubsidized diesel fuel, while most of their products were
\ndirected for overseas markets.<\/p>\n
\"The balances are wrong and we need to get people to use
\nelectricity,\" he said.<\/p>\n
Electricity<\/p>\n
Although the present electricity supply still outweighs
\ndemand, Indonesia needs to start building new power stations four
\nto five years ahead, he said.<\/p>\n
In anticipating a surge in power demand, the government
\nsupported the construction of private power stations during the
\nearly 1990s to supply state-owned electricity company PT PLN.<\/p>\n
The economic crisis, however, lowered the country's power
\nconsumption as industries cut their production capacities,
\ncausing PLN and independent power producers to face an oversupply
\nof power.<\/p>\n
Nevertheless, he said, there was still a huge lack of power
\ntransmission to distribute the electricity from the power
\nstations.<\/p>\n
Younger said unlike the telecommunications sector, which has
\nbeen rapidly growing due to the involvement of the private
\nsector, the development of roads and public sanitation,
\nespecially in large cities, still depended on financial aid from
\nthe government.<\/p>\n
He predicted that by 2025, some 50 percent of Indonesia's
\npopulation would end up living in cities, which was the normal
\ntrend for a growing economy.<\/p>\n
He said development of infrastructure should start in growth
\ncenters, which are the major cities in the provinces, to turn
\nthem into viable living places.<\/p>\n
\"In Jakarta, health problems because of a lack of water
\napproaches $1 billion a year plus what we lose in terms of
\nproductivity because of poor health,\" he said.(bkm)<\/p>",
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