Thursday, 28 June, 2012 | 21:07 WIB
Slow to Build Infrastructure
TEMPO Interactive, Jakarta:The government seems to be unaware of the importance of infrastructure development. The amount of the state budget allocated for facilities that accommodate economic growth is relatively small. The government is also slow in preparing regulations that will facilitate land acquisition for important projects.
Indonesia has Law No. 2/2012 on Land Provisions for Development Related to Public Interest. However, so far, the government has yet to issue the directives in the form of a presidential decree. As a result, land acquisition problems, a major factor that may stall infrastructural development, remain unsettled. This leads to multiple projects, including 24 toll road construction projects, being stalled.
The government is not only slow to issue a presidential decree but also to specify the regulation. The draft, currently being prepared, contained a transitional policy that has been considered to be more of a hindrance than assistance in infrastructure development. The draft mentioned that the transitional period from the old policy to the new policy would not be effective until late 2014. It means that ongoing projects will still use the old policy until late 2014 if the projects are not finished yet, prolonging the process even further.
The policy has triggered doubts among businesspeople who were, at first, optimistic about the new policy. This will lead to further stalling of infrastructure development. Furthermore, Indonesia is far behind its neighboring countries such as Malaysia and Thailand—both are competitors when it comes to attracting new investors.
The government should be consistent in its infrastructure development efforts, especially as Finance Minister Agus Martowardojo is optimistic that when infrastructure matters are settled, Indonesia may achieve 7 to 7.7 percent economic growth. Good infrastructure will attract investors, both domestic and foreign, that will boost the country’s economy. However, if the regulation is only applied in 2014, Minister Agus’ optimism will mean nothing because we will still face the same problems.
A lack of seriousness is also evident in terms of funding. The government has repeatedly encouraged the private sector to be involved in the funding of infrastructure projects through, among others, public-private partnership schemes. However, the government only allocates a small amount for the infrastructure development scheme—an average of Rp160 trillion each year, including maintenance costs.
The lack of government support is also evident in the ratio of infrastructure budget to gross domestic product. This year, the portion is only 2.21 percent. Ideally, the ratio should be 5 percent. Not surprisingly, the impact of development on economic growth is relatively low at 0.17 percent. In China, the figure has reached 0.33 percent and in India 0.21 percent. If the government keeps neglecting infrastructure development, Indonesia will continue to have a hard time competing with other countries.