Content area
Full Text
In any emerging nation, efficient infrastructure holds the key to economic and social development. In the case of Indonesia, however, decades of under-investment and poor asset management have left the country with a significant infrastructure deficit. This paper explores the key problems facing infrastructure development in Indonesia since the Yudhoyono era. The current administration aims to tackle this challenge and improve the competitiveness of the Indonesian economy. Compared to the previous administration, the incumbent government has taken a more pragmatic approach to achieve its goals. One major policy has been to shift budget allocations away from fuel subsidies and towards infrastructure development. This has also been accompanied by continued efforts to reform regulatory and institutional frameworks. Despite these measures, the overall progress of Jokowi's infrastructure development has not been as smooth as expected. Limited resources and capacity mean that the administration needs to re-evaluate the number of national strategic initiatives and be more selective in prioritizing infrastructure projects. Moreover, the national strategic projects must be linked to larger development plans with longer time-frame, such as the National Spatial Plan and sectoral master plans in order to achieve integrated regional development.
Keywords: Infrastructure, financing, PPP, SOE, land acquisition, development, Indonesia.
In many ways, the policy and management bottlenecks in the infrastructure sector are a microcosm of the problems of the overall management of government in Indonesia.
Peter McCawley (2016)
1.Introduction
Infrastructure investment has been identified as one of the key catalysts for unlocking a country's overall economic potential, promoting growth, creating jobs and reducing poverty. Efficient infrastructure is also needed to lower distribution costs, make prices of goods and services more affordable, and improve living standards (ADB 2017). Good infrastructure brings better social and economic mobility, leading to better living conditions. For Indonesia, a country with a large population and an archipelagic territory, developing efficient infrastructure is important for ensuring sustainable and inclusive growth.
Infrastructure investments have been traditionally financed by public funds (OECD 2014). After the 1997-98 Asian Financial Crisis, Indonesia's infrastructure spending fell from around 9 per cent of GDP in the mid-1990s to around 2 per cent in 2001 (OECD 2015). By 2014, infrastructure spending had increased to 3.6 per cent of GDP. This level, however, was relatively low compared to Asia's...