Infrastructure development needed to boost economic growth

The West Java administration held a two-day summit last week to offer 57 infrastructure projects worth Rp 35 trillion (US$3.53 billion) to investors as part of the province's efforts to boost economic growth from the current 5 percent to 8 percent over the next five years. The projects are expected to reduce unemployment and poverty in the province. The Jakarta Post's Zakki P. Hakim talked to Asian Development Bank (ADB) senior advisor Vladimir Bohun, whose institution supported the event financially. The following are excerpts from the interview.

Question: Why was the ADB interested in the West Java Infrastructure Summit?

Answer: Because we believe that (infrastructure) projects at the subnational level, which means the provincial and district levels, will become increasingly important if the (central) government wants to achieve its macroeconomic targets. It needs infrastructure development at all levels from national, provincial to district. Without it, it would be difficult to achieve the goals.

Now that we have infrastructure projects being offered at both the national and regional levels, which approach do you think is more important?

The whole thing is still fluid. You know, this morning (on Thursday) Sri Mulyani (State Minister for National Development Planning) said the government was still catching up with the new laws, and there was still local confusion on how decentralization should really work.

Therefore, for this year, we will not see a significant improvement in infrastructure development. But we hope that the government can get its act together and next year the infrastructure summit will start to work out.

Do you mean a significant improvement as regards only government spending on infrastructure projects?

No, both. The public sector resources for infrastructure have to be increased and at the same time large-scale private sector partnerships need to be achieved. Only with such a combination can Indonesia (improve its infrastructure). If the government now in the state budget allocates billions of dollars for fuel subsidies, then that money will not be available for development purposes.

The ADB has a tagline 'Fighting poverty in Asia and the Pacific'. How does that apply to its involvement in the event?

Yes, poverty alleviation is the main goal but equally important is economic growth. If I put it another way, you can't achieve poverty alleviation without sound economic growth and you can't achieve sound growth without good infrastructure. So, you see the link.

Did you get the impression from this event that most of the infrastructure projects are concentrated in urban areas, mostly in the more advanced northern part of the province, instead of being spread evenly to help rural areas?

I like (this morning's) speech by Coordinating Minister for the Economy Aburizal Bakrie, who put equal emphasis on commercially viable projects where the private sector is welcomed and needed, but also on infrastructure development in rural areas that calls for the public sector obligation. Both are equally important.

Are you optimistic after this summit?

The government has expressed its political will from the highest level, starting from the President through his top ministers and they started with the Infrastructure Summit in January in Jakarta. That is continuing here.

Now, this will have to be translated into reform -- some important reforms have been implemented -- but it has to continue and also (the implementation of) what we call "model projects".

Projects that have been selected in a transparent way, where the private sector sponsors have been selected through competitive bidding. Such projects need to be implemented.

You can do the same thing at the provincial level. You have this Cikalong port project, which is technically, economically and financially viable, and would be a good example of a public- private partnership. The public sector at the provincial level provides the port infrastructure and then you select the private sector to build the superstructure, like cranes, for operating the port.

Would it be desirable for other province to follow what West Java has done?

Yes, sure it's necessary. Because one can't achieve, manage everything from the center under the current decentralization. All levels must be involved and have to follow the same goals.

But not necessarily through holding a summit?

This (the summit) is just to express the will, that they want to do it and will proceed with the reforms, and also to publicize information and projects. It's a good beginning, but it's certainly not the end.

I understand that the ADB supported the event financially. Why do you do this?

Yes, we have been pleased to be co-sponsor, exactly because we see infrastructure investment at the provincial level as very important.

So, if other provinces proposed holding a similar event, would you also help finance them?

That could be difficult because we don't have unlimited resources. We hope this will pose a good demonstration so that other sponsors may step in to do the same.

Again, this is a good beginning and we welcome very much the initiative of the provincial administration and the (central) government.