Infrastructure needed for growth

Rendi A. Witular, Jakarta

A senior economic minister warned that the economic growth target of 5.4 percent, as set in the draft 2005 state budget, may not be attainable unless the next government dramatically improved infrastructure in the country.

Coordinating Minister for the Economy Dorodjatun Kuntjoro- Jakti said lack of infrastructure for the business community would prevent the government from achieving several targets in next year's draft budget.

"From my experience, achieving economic growth of almost 5 percent with the present condition of infrastructure will be extremely difficult, especially for areas outside Java," Dorodjatun told reporters on Wednesday after a meeting with the Indonesian Chamber of Commerce and Industry (Kadin).

He said adequate infrastructure was essential to increase investment and push economic growth higher.

The problem of inadequate infrastructure could be resolved if the financial flow from the central to regional governments or from major to minor cities reached at least Rp 120 trillion (US$13.3 billion) over two consecutive years, he said.

With the spread of funds into regions, local governments would be expected to use its autonomy to build their own infrastructure, such as roads, ports and railways, without depending on Jakarta.

A region that can provide adequate infrastructure for its business community will have a better chance at luring investors, Dorodjatun said.

Under the draft 2005 state budget, the Ministry of Regional Settlement and Infrastructure will receive Rp 12.4 trillion, a 3.3 percent increase from last year. The funds will be allocated mainly toward the building and maintenance of roads, bridges and irrigation canals, as well as flood control and coastal security programs.

The government is in the process of constructing a 1,000 kilometer toll road next year that will link Merak in Banten and Banyuwangi in East Java, and a deep-sea port in Banten, which is expected to become a hub for cargo vessels in Southeast Asia.

To realize the projects, the government has teamed up with the private sector for funding.

In an earlier report, Kadin chairman Mohamad S. Hidayat lamented the small allocation for infrastructure construction compared to total state expenditures of Rp 264.9 trillion, including Rp 64 trillion to service public debt.

Hidayat said the infrastructure budget needed to be about Rp 50 trillion to boost the economy.