Building, One Road at a Time

8/30/2012

 

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As Indonesia improves its ailing infrastructure, entrepreneurs and companies view the effort as an opportunity to invest, despite fears of bureaucracy and corruption interfering with public works projects.
“Despite the global economic crisis, Indonesia has the chance to really accelerate [its economic development], and it starts with infrastructure and connectivity,” Jakob Friis Sorensen, chairman of the European Chamber of Commerce, told the Jakarta Globe on the sidelines of the Indonesia International Infrastructure Conference and Exhibition 2012 on Tuesday.
 
The three-day event, held at the Jakarta Convention Center , is highlighting the government’s Master Plan for the Acceleration and Expansion of Economic Development (MP3EI), a Rp 4,000 trillion ($420 billion) project that focuses on infrastructure development across the country.. The plan, which was announced in May last year, is an attempt by the government to boost its infrastructure by sharing the investment burden with the private sector, similar to a public-private partnership program undertaken by other countries such as the Philippines.
Sorensen praised this plan, saying that better infrastructure means companies can better distribute and market their products to remote parts of the country.
However, he acknowledged the complexity of undertaking infrastructure projects in Indonesia.
“The plans and the ideas that we want to achieve are clear and the discussion is indeed happening, but it’s just so complicated,” Sorensen said.
He added that the persistent debt crisis in the euro zone has made many European companies worried about investing in Indonesia but he called on them not to be overly concerned — to take a chance, jump in and participate in Indonesia’s economic development.
Russian Ambassador to Indonesia Alexander Ivanov said that Russian interest in Indonesia remains strong, including investment in a $2.5 billion railway project in Central Kalimantan. Russian airlines are also keen to expand in the aviation industry and other companies are keen to build smelters for processing minerals, he said.
In his speech at the opening of the Asia Pacific Ministers and Regional Governors Conference on Sustainable and Inclusive Infrastructure Development 2012, President Susilo Bambang Yudhoyono said the government has allocated $20 billion for infrastructure development next year.

He did not specify where the money would come from, but the figure is close to the Rp 193.8 trillion that the government has allocated for spending on capital goods and infrastructure development in the draft 2013 budget.
Yudhoyono said the focus of the $20 billion will be on the energy and transportation sectors. The government hopes to extend the length of current national roads by 4,278 kilometers. It also plans to build more than 500 kilometers of new roads, 380 kilometers of railways and 15 additional airports.
For the government and investors, developing infrastructure such as airports, roads, power and water facilities has never been easy. Aside from land acquisition problems, supporting infrastructure development in remote areas is challenging.

In Medan, North Sumatra, Kuala Namu Airport is on the list of projects in the MP3EI. Construction for the airport — designed to be the second-largest airport in Indonesia after Soekarno-Hatta International Airport, near Jakarta — is close to completion. It was supposed to be opened this year but the road to the airport has not been widened to accommodate the burgeoning traffic.
It now takes more than an hour to drive along the rugged 40-kilometer public road, which has two small lanes and villagers living on the side.
Companies including Philips Indonesia are showing interest in take part in the country’s infrastructure push. The company is famous in Indonesia for its electricity-saving lights bulbs.
“We had developed the right solution for lighting Indonesian airports in a way that is environment-friendly as well as user-friendly,” said Robert Fletcher, the company’s president director. He said Munich International Airport in Germany conserves 300,000 euros ($376,000) in electricity costs by adopting Philips’ technology.
Kartika Wirjoatmodjo, president director of Indonesia Infrastructure Finance, a company owned by the Finance Ministry, said the biggest challenge is for the government to attract more of Indonesia’s large conglomerates to invest in infrastructure rather than investing in natural resources and mining.

Hatta Rajasa, the coordinating minister for the economy, said the MP3EI has garnered positive responses from investors.
“Within a year of MP3EI starting, we have secured some $82 billion worth of investment in infrastructure, or 20 percent of the total,” he said.
Didik Junaedi Rachbini, a politician from the National Mandate Party (PAN), and Suryo Bambang Sulisto, the chairman of the Indonesian Chamber of Commerce and Industry (Kadin), an influential lobby group, said the government could spend more on infrastructure if it reduced energy subsidy costs. In the 2013 draft budget, the government has allocated Rp 274.7 trillion for energy subsidies, 18 percent of the total in proposed spending.
Additional reporting by Shoeb K. Zainuddin & Faisal Maliki Baskoro
 
Source: Jakarta Globe
Tito Summa Siahaan & Arientha Primanita | August 29, 2012