Wed, 23 Feb 2011

TEMPO Interactive, Jakarta:Indonesian economy could grow up to 7.6 percent from 2011-2014 if the government increases its spending for transportation infrastructure by 20 percent each a year.

Another requirement is that private sector participation should be increased to 50 percent. “This is a logical scenario,” said Standard Chartered Bank Economist, Eric Alexander Sugandi, during a discussion on Indonesia’s Infrastructure Problem yesterday.

The National Development Planning Agency (Bappenas) said that Indonesia needs Rp 1.429 trillion to develop its infrastructure from 2010 to 2014. Most of the funds would be allocated to build and repair harbors, airports and electricity provision.

But the government can only provide Rp 386 trillion (27 percent) of the needed funds. The rest is expected to come from the private sector. In 2011, the government only allocated Rp 126 trillion to build infrastructure or 10 percent of the government capital spending.

In addition to its own capital, the government is funding the construction of infrastructure by issuing bonds. The first bond will be issued in 2011-2012, in the form of infrastructure suku.

Standard Chartered Bank Economist Fauzi Ichsan said that the slow infrastructure development is caused by the regional governments’ financial or technical inability.
In the 1990s, infrastructure construction was carried out by the central government. “After the regional autonomy, there was infrastructure chaos, because the regional governments were incapable of carrying it out,” he said.
As a consequence, the private sector must participate.

But to involve them, the government must give assurances, namely that the contract signed at the initial stage will not change later on. “Investors also hope that the government will guarantee certainty over land acquisitions,” he said.