Awakening the 'Sleeping Giant'

Indonesia

Economic News

22 Jul 2010
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An announcement made last week by Governor Barnabas Suebu has shaken up the province's budget by shifting emphasis from the government to rural and infrastructure development programs. This ambitious restructuring is set to unleash a 'sleeping giant,' according to Suebu.



The development plan announced by the governor is to distribute RP100m ($11,100) to all of the 3864 villages in the two regions.



Suebu however made clear this was not a handout for officials. He told the local press, "This is not a gift from Santa Claus." The money will be disbursed after local governments provide plans about how they intend to spend the money and establish a supervisory mechanism to ensure the money is spent accordingly.



The office of the governor is in charge of distributing the autonomy funds for the provinces of Papua and West Papua (West Irian Jaya was renamed West Papua earlier this month).



Papua, Indonesia's largest governorate in land area and smallest in population size, is the country's least-developed region. Suebu told the local media, "80% of Papuans live in villages in poor conditions, if not absolute poverty".



In 2006, the Papua budget allocated 70% for the state apparatus, 20% for infrastructure and public spending, and 10% for rural spending. The 2007 budget, released last week, will cut state apparatus funding to 27%, bring infrastructure and public spending to 25% and most significantly, bring up rural development to 45% of the total.



Some of the main goals of the development program are improving nutrition, education, health, local economies and infrastructure, as well as addressing issues such as gender equality, sustainable forest management and law and justice.



Suebu announced an ambitious integrated transportation network program that he said would spur growth. The government said that between RP50 trillion ($5.4bn) and RP100 trillion ($10.9bn) would be spent in the coming years on developing seaports, airports and highways. Suebu said with an integrated transportation network, isolated areas would be opened and more investors would come and awaken the 'sleeping giant'.



A highlight of this initiative is the 3000km Trans Papuan highway, which is scheduled to begin construction this year. It will connect Papua to West Papua at an estimated cost of RP30 trillion ($3.2bn).



Among Indonesia's least tapped possible investment areas, Papua has an estimated 540m cu metres of potential commercial timber, 9m hectares of forest conversion areas for large-scale plantations, 2000 miles of coastline, 220,000 sq km of sea and 1.3m tons of potential fishery products per year. Vast opportunities also exist in the mining sector. The PT Freeport mining concession area in West Papua, the largest in the country, has an estimated 2.5bn tons of copper and gold reserves.



Foreign investment is one of the governor's primary objectives to develop the region. In November he told local press, "We will work out of a regional regulation on customary land and provide skilled labor to attract investors to come to Papua."



The latest announcement of foreign investors coming to Papua was announced in November 2006, with two Chinese companies announcing investments in the airport and seaport in the Biak regency, in Northwest Papua.



China National Property Administration Council and Qili Holdings announced they would spend $130m in the first stage and $800m in the second stage of the investment plan. Suebu said this would help develop Biak into a major center for trade, investment and tourism in Papua.



Part of the investment will go into renovating the port facility to provide it with equipment for processing fish and a container terminal for domestic and international trade.



Special autonomy status was awarded to Papua in 2001 under which state funds are transferred to the provincial government for distribution. The province has received RP5 trillion ($549m) annually for the last 5 years.

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