Infrastructure development needed to boost economic growth

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.