Hatta Rajasa: Private Sector Funding of Projects is Cheaper

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  • Hatta Rajasa, Coordinating Minister for Economic Affairs. ANTARA/M Agung Rajasa

    Hatta Rajasa, Coordinating Minister for Economic Affairs. ANTARA/M Agung Rajasa

    A number of plans to accelerate regional economic growth have been tried, under different names, according to the whims of the local government in power. One was called the Integrated Economic Development Area, covering 13 areas. Then there was the Free Trade Zones of Batam, Bintan and Karimun, followed by the Special Economic Zones in a number of other areas.

    The newest concept to emerge is called the Indonesian Acceleration and Expansion of Economic Growth Master Plan (MP3EI), which has been touted as the engine of economic growth and one way to end disparity between the regions. Six economic corridors are being pushed, in Sumatra, Java, Kalimantan, Sulawesi and the regions of Bali-Nusa Tenggara and Papua-Maluku.

    Coordinating Minister for the Economy concurrently the Executive Director of the MP3EI, Hatta Rajasa explained the concept to Tempo reporters Aryanto, RR Ariyani, Angga Sukma Wijaya, Praga Utama and Imam Sukanto in a series of interviews.

    What is the difference between the MP3EI and previous area development concepts?

    Following a long study, it was found that our connectivity has not resulted in value added, hence creating disparities between the regions. The increasingly low quality of human resources in the regions also occurs because of the brain-drain that ends up in the growth centers, like Java. On the other hand, the specter of the ASEAN Economic Community is right in front of our eyes, and in 2020 we will enter the APEC liberalization era. There is no way to avoid global economic integration. The idea of connectivity should be attempted not just by using loans as in the past, because it just slows everything down. Legislation should also ensure it is liberalized, so (infrastructure) can be built by the private sector too.

    In the past, the scope of area of the Integrated Economic Growth Area was small, unintegrated because connectivity was never discussed. Now, we have built the Special Economic Zone in Kalimantan, Sumatra and Papua, where we will provide tax holidays and tax allowances.

    What standards will be used to measure whether the MP3EI succeeds or not?

    The standards must be clear, especially for growth areas, like gross domestic product must increase by building the corridor thematically. For example, in Java the services and smart industries must be maintained. There can be no high-polluted industries in those areas.

    Why won't the government fund the MP3EI?

    It was not designed to be funded by state revenues or the State Budget (APBN). From 2011 to 2015, of the Rp 4,000 trillion allocated, Rp 1,000 trillion of it is funded by state-owned enterprises. The remainder is funded by private national companies and direct foreign investment.

    Wouldn't funding from the private sector be more costly? That's what all the criticism is about.

    No. That was our decision when we decided to build the Bali airport and toll road over reclaimed sea land there. As such, we follow the assignment system, with state-owned enterprises synergizing (among each other) and a presidential decree has been created to cover them. The result is that it's done faster, cheaper and better. Imagine if it was tendered out, they would still be fighting about it. It would be a mess.

    What are the legal constraints?

    We formed the Regulatory Work Group, led by Sofjan Wanandi. There has been many regulations changed, including the Law on Land Acquisition, which will be enacted on 2014. Obstructing local and provincial laws will also be reviewed.

    Why isn't the MP3EI project in Sumatra connecting the corridors to the ports, when Indonesia is a maritime state?

    Where isn't the MP3EI not maritime? Our connectivity places Indonesia as a maritime continent by strengthening ports from the west all the way to the east. Then we will build feeders and hubs. It's very maritime in nature.

    Why is the Sunda Strait Bridge triggering so much criticism? 

    The Rp 200 trillion budget may sound huge, particularly just to connect two islands, while there are so many others in Indonesia. It's so difficult for Flores alone to build a port. Flores finds it very difficult to cross to the next-door island, so why the interest in its big spending? That's why I disapprove of using the State Budget for this. It wouldn't be fair. But we don't want to burden the government with it.

    The Sumatra corridor is Rp298.5 trillion, way above the corridor planned for Papua, which stands at Rp 3.5 trillion. 

    This year, Papua, West Papua, Maluku and North Maluku will record the highest investments ever, particularly from the downstream mining sector.