Indonesia launched strategic infrastructure projects
These major projects are worth billions and are part of the government’s five-year development plan until 2024. Availability of local and long-distance public transport is the key points for the government.
The five-year medium-term development plan (RPJMN, only available in Indonesian) from the Indonesian planning authority Bappenas has defined the country’s 41 major strategic projects of national priority with a total volume of around US$500 billion (about Rp 7.37 quadrillion). These are to be initiated or completed between 2020 and 2024. The focus is on urban and industrial development.
Some of the projects in the list are already under construction, such as the Jakarta-Bandung high-speed rail line. Others, such as the development of the metropolitan region for the four cities of Palembang (southern Sumatra), Banjarmasin (southern Kalimantan), Makassar (southern Sulawesi) and Denpasar (Bali) or the expansion of local public transport in six major cities, are new.
Construction of a new capital
The project list reflects the priorities of President Joko Widodo, who wants to make the development of the archipelago's infrastructure a hallmark of his tenure. Above all, the construction of the new capital in the province of Eastern Kalimanten should be his political legacy.
The new capital is a symbol of regional development, which is another core element of the RPJMN. Java, which makes up less than seven percent of the archipelago's land area, currently represents about 60% of Indonesia's economic output. Much of the country’s industry is located in Java and its infrastructure is the most developed. All six elected presidents of the country were Javanese. The other regions fall behind in almost all social indicators.
Selected projects for the expansion of urban infrastructure and industry
Project name | Aim | Cost (and funding sources) (In US$ Bn)* |
|---|---|---|
Urban infrastructure | ||
Development of metropolitan regions for Palembang, Banjarmasin, Makassar, Denpasar | GDP growth outside of Java | 20.0 (state budget, PPP, private sector) |
Construction of a new capital | Development of East Indonesia | 33.7 (private sector: 18.7; PPP: 8.9; private sector: 6.1) |
| Jakarta-Semarang and Jakarta-Bandung high-speed rail lines (the latter already under construction) | Reduction of travel time: 5 to 3.5 hours / 3 hours to 40 minutes | 7.3 (national budget: 4.2; private sector 3.1) |
Expansion of local public transport in Jakarta, Surabaya, Bandung, Medan, Semarang, Makassar | 30 percent increase in user numbers | 10.7 (State budget: 4.6; Provincial budget: 3.7; PPP: 2.4) |
| Industry | ||
Promotion of Industry 4.0 in the food, textile, automotive, electronics and chemical sectors | Industrial share increased from 19.9 to 21.1 percent | 7.5 (private sector: 6.0; national budget: 1.4; PPP: 0.1) |
Training for Industry 4.0 | Increase of medium and higher qualifications by 50 percent; Training qualifications for 2 million people | 24.3 |
Construction of 31 ore smelters outside of Java | Economic development outside of Java | 10.9 (private sector: 10.3; national budget: 0.6) |
*) Exchange rate from February 2020: 1 US $ = 13,700 Rupiah Source: RPJMN, National Ministry of Planning (PPN) / Bappenas Planning Authority | ||
More money for education and research
The second focus of the second and final term of the office of the President, which started in October 2019, is on increasing the level of education. The current account deficit is Indonesia's biggest obstacle to becoming an industrialized country. The development plan includes spending $24.3 billion on education and training for higher value industrial activities.
There are also huge deficits in research and development. Indonesia is developing almost nothing by itself beyond minor local adjustments. A project in the development plan is to remedy the situation: the connection of the research activities of four large universities in a joint Science Techno Park, which will come with $170 million worth of funding from the state budget. A bill currently being drafted aims to provide for easier work and residence permits for foreign scientists.
In 2019, the government also created a new agency to coordinate its research and development activity: the National Research and Innovation Agency (BRIN). So far, the archipelago has only spent between 0.1 and 0.2% of its gross domestic product on R&D – a miniscule amount when compared to, for example, South Korea at 4.6%.
Wanted: private capital
The projects listed in the development plan are only rough designs of numerous individual projects. Which part of them gets realized depends on the funding. The biggest problem with the implementation of large projects is always the lack of availability of private capital.
Projects that are planned with a high private share therefore have a poorer chance of being realized. This is due to the poor investment conditions, especially for foreign companies in regional comparison. Having said that, a legislative package known as the Omnibus Bill on Job Creation is currently in the ratification process and is intended to significantly improve this.
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