Bappenas: Indonesia Needs IDR 7.200 Trillion for Infrastructure Development
The Ministry of National Development Planning (Bappenas) estimates that between 2015 and 2020 the country needs IDR 7.200 trillion (USD $600 billion) for investments in infrastructure. However, the central government can only supply about 25 percent of the needed investments. These figures are the preliminary results of a study conducted by Bappenas. The study, which focuses on Indonesia's infrastructure development in the period 2015 to 2020, is expected to be completed by March 2014.
Good quality and quantity of infrastructure is one of the prerequisites for the government's ambition to raise Indonesia's per capita GDP to USD $10,000 by 2020 from USD $3,500 in 2013. According to Bappenas, if infrastructure investments amount less than IDR 7.200 trillion between 2015 and 2020, then it will limit the country's economic expansion. The current lack of adequate infrastructure causes Indonesia's logistics costs to rise steeply, thereby reducing the country's competitiveness and attractiveness of the investment climate. According to the Indonesian Chamber of Commerce and Industry (Kadin Indonesia), over 20 percent of a company's total expenditure in Indonesia is absorbed by logistics costs. This is an amount that is significantly higher than in other Asian emerging markets. More importantly, it curbs economic growth in Southeast Asia's largest economy.
Bappenas estimates that IDR 2.000 trillion (USD $167 billion) is needed for construction of roads and bridges, of which 20 percent of investments is expected to originate from the private sector. The Ministry expects that IDR 1.600 trillion (USD $133 billion) is needed for investments in the country's energy infrastructure.
Through the Masterplan for Acceleration and Expansion of Indonesia's Economic Development (MP3EI), introduced in 2011 by the Susilo Bambang Yudhoyono administration, the government intends to tackle the country's infrastructure problem through public-private partnerships (PPPs). However, regarding these PPPs, there are no promising results yet. The private sector is not too eager to participate in infrastructure PPPs because the projects usually involve large investments and patience before profits can be generated. Moreover, legal (un)certainty, corruption, bureaucracy and land acquisition are the most notorious obstacles that make the private sector think twice before participating in PPP projects in Indonesia.