JAKARTA: Since taking office in October, Indonesia\u2019s Joko Widodo has been unrelenting in his pursuit of investment dollars.<\/p>\n
In just the first quarter, almost US$6.5 billion flowed into Indonesia - 14 per cent higher than in 2014, according to
\nthe Indonesia Investment Coordinating Board.<\/p>\n
Quasi-public lenders like the World Bank, the Asian Development Bank (ADB), and the up and coming Asian Infrastructure
\nInvestment Bank (AIIB), are lining up to plow billions into the country\u2019s infrastructure projects.<\/p>\n
Add to that the US$23 billion freed up by the cut in fuel subsidies and Indonesia is primed for some major development.<\/p>\n
The World Bank has pledged up to US$12 billion in new loans over the next four years for basic infrastructure like roads
\nand seaports. The ADB and the AIIB are also eyeing Indonesia.<\/p>\n
\u201cBesides government funding, we have to be doing it with the private sector as well as the state-owned enterprises that
\noperate on the infrastructure, like ports, like airports, like railways and roads,\u201d said Indonesian Deputy Minister of
\nInfrastructure and Regional Planning Luky Eko Wuryanto.<\/p>\n
The funding could not have come at a better time, especially for Indonesia\u2019s seaports which are buckling under the
\nweight of heavy traffic, antiquated infrastructure and layers of bureaucracy.<\/p>\n
Two-thirds the country\u2019s trade passes through the berths at Tanjung Priok, Indonesia\u2019s largest port, which is part of
\nthe reason why it has one of the longest dwell times of 5.5 days - almost twice as long as it would take in Malaysia,
\nand five times longer than Singapore.<\/p>\n
The dwell time is how long it takes for containers to be offloaded from ships to when the ship actually leaves the port.<\/p>\n
\u201cIf there\u2019s congestion in this place, it\u2019s not because of the port. It\u2019s because of the seven government agencies that
\ncan\u2019t clear up the documents in order to make the goods get out on time,\u201d said Richard Joost, president director of
\nPelindo II.<\/p>\n
SHACKLES OF BUREAUCRACY<\/p>\n
Bureaucracy is the battle cry of most business leaders and a major deterrent to foreign investors. The country ranks a
\nlowly 114 out of 189 on the World Bank\u2019s Ease of Doing Business scale.<\/p>\n
\u201cAll the producers, the manufacturers, can\u2019t make productions on time because they can\u2019t be sure when the goods are
\ngoing to be out of the port,\u201d said Joost.<\/p>\n
That, along with poor roads and spotty connectivity among Indonesia\u2019s 17,000 islands, makes Indonesian goods more
\nexpensive. According to the World Bank, logistics costs amount to 24 per cent of GDP \u2013 an enormous tax on the country\u2019s
\neconomic growth. If Indonesia could cut its logistics costs by just a third, it could save up to US$80 billion a year.<\/p>\n
That money could be funnelled back into the economy, which in turn could attract more FDI. That money is essential
\nbecause Indonesia needs US$450 billion for infrastructure projects over the next four years but the government can only
\ncover 30 per cent of that.<\/p>\n
\u201cAs long as the government can really show their commitment in pushing this development in infrastructure like pushing
\nthe land clearance, like trying to really streamline the regulation or the hurdle in the local government, things like
\nthat, I think it will be seen positively by the private sectors,\u201d said Mandiri Sekuritas senior economist Aldian Taloputra.<\/p>\n
\u201cThen they have more confidence to start their investment in the country.\u201d<\/p>\n
That could go a long way in boosting the country\u2019s growth, which is now growing at its slowest pace in six years.<\/p>\n
\u201cWe believe that infrastructure now is the real story,\u201d said Budi Hikmat, director of Bahana TCW Investment Management.
\n\u201cInfrastructure has been a false hope in the past 10 years. Now the key is in the budget after the parliament approved
\nthe budget. There is a real hope.\u201d<\/p>\n
\u201cIndonesia fundamentals are still very much there,\u201d added Lianna Plaut, country director of Global Business Guide
\nIndonesia. \u201cHowever, should the infrastructure not be put in place to take advantage of those fundamentals, then they
\nwill lose out on their opportunity in the next couple of decades to really reach their potential as an investment
\ndestination.\u201d<\/p>\n
The influx of investment dollars could be a turning point for Indonesia. The challenge now is making sure that money
\nflows into the right projects, and that those projects are completed on time and on budget.<\/p>\n
If that happens, many of the barriers holding back the Indonesian economy - and its many businesses - could be knocked
\ndown, giving them a real shot at reaching their full potential.<\/p>",
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