Infrastructure
From The Report: Indonesia 2014
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A result of decades of underinvestment, creaky infrastructure has long been the Achilles’ heel of the Indonesian economy. Around $6.8bn will be spent on power and some $29bn on water utilities and other services under the Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development. The government is expected to fund 28% of the cost, with the rest coming from the private sector. The government aims to meet 2% of the country’s power demand from nuclear energy by 2017. In February 2014 it confirmed plans to build a 30-MW nuclear power plant in western Java. Although private sector involvement in water services remains limited to date, the government has envisaged that nearly 70% of water infrastructure investments between 2010 and 2014 will come through public-private partnerships, community participation and the private sector. Improving infrastructure will continue to be a priority with Indonesia’s sovereign rating upgraded to investment grade and its economy growing at a steady pace.
This chapter contains interviews with Djoko Kirmanto, Minister for Public Works; Stuart Dean, CEO, General Electric ASEAN; and Bobby Umar, Chairman, Indonesian Engineers Association.

Articles from this Chapter

Overview

A change in focus: Plans are under way to expand access to utilities, boost the power supply and diversify the energy mix
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A result of decades of underinvestment, creaky infrastructure has long been the Achilles’ heel of the Indonesian economy. The archipelago has not been able to build the hard infrastructure essential for sustaining growth. The World Economic Forum’s “Global Competitiveness Report 2013-14” ranked Indonesia 61st out of 148 countries for the state of its infrastructure, and improvements have not kept pace with the robust economic expansion that the country has witnessed since recovering from…

Interview

Djoko Kirmanto, Minister for Public Works: Interview
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Interview:Djoko Kirmanto What can the government do to improve investor appetite for public-private partnerships (PPPs)? DJOKO KIRMANTO: The government has established major support facilities to bolster the realisation of PPPs, including the “One-Stop Service” and the Land Revolving Fund. The latter features several dedicated infrastructure guarantee funds, underpinned by the Viability Gap Fund. Investment is a long-term, high-risk endeavour, so the government must meet investors halfway…

Analysis

Opportunities abound: Encouraging private sector investment in the sector
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Financing the infrastructure sector is a major challenge for Indonesia. The government simply does not have the financial muscle to fund all of the necessary infrastructure projects on its own. According to the Ministry of Public Works, Indonesia requires $192bn of infrastructure investment between 2010 and 2014. The government and state-owned enterprises can only provide around $56bn, so the private sector will need to chip in as well. Indonesia plans to invest more than $390bn in infrastructure…

Interview

Bobby Umar, Chairman, Indonesian Engineers Association: Interview
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Interview: Bobby Umar When it comes to human capital, which engineering disciplines are most lacking in Indonesia? BOBBY UMAR: To provide a context, Indonesia has a population of 240m people but only 800,000 engineers – around one-third of the number that the country needs. Indonesia is lacking in engineering disciplines related to natural resource industries such as agriculture, energy and mining – areas where we should be very strong by now. Those competencies that we do have are mostly concentrated…

Analysis

Filling the gap: Improving institutional capacity and inter-ministry coordination
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In a series of bold steps to improve the infrastructure sector in the past few years, Indonesia has introduced regulatory reforms, expanded the space for private sector participation, extended investment risk guarantees, raised tariffs, passed the Land Acquisition Act and simplified registration processes. However, bureaucratic red tape, lack of coordination between government agencies and weak institutional capacity in the civil service remain the top challenges in the country’s attempt to attract…