TEMPO.CO, Jakarta - International Monetary Fund (IMF) Managing Director, Christine Lagarde, has recommended infrastructure development as one of the measures that will help rejuvenate Indonesia`s growth.
Lagarde delivered a general lecture at the University of Indonesias Economy and Business Graduate School in Jakarta on Tuesday, where she said modern and efficient infrastructure was vital for connecting people and markets, both within the country and globally.
She also pointed out that infrastructure in Indonesia, especially in the transport and power sectors, was still subpar.
For example, logistics costs account for 24 percent of Indonesia's gross domestic product (GDP), compared with only 13 percent in Malaysia, and because of the disparities in transportation costs, the price of some basic commodities can be 20 times higher in eastern provinces than in Java.
At the same time, electricity rates are about 80 percent higher than universal coverage in Indonesia`s peers.
Lagarde emphasized that reducing transportation costs and ramping up power production could help create jobs in manufacturing and services, as well as help Indonesia connect better and serve global clients.
Moreover, Lagarde noted that infrastructure was also related to the quality of human capital.
"Infrastructure is not just about bridges, railroads, fast trains, but also human capital. So, investment in human resources is also critically important," she noted.
Lagarde further explained that by 2030, about 64 percent of Indonesia`s population would be dominated by youth, hence if there was investment in education, health and various other forms of training, it would unleash the youth potential of the country.
"It also means higher investment in the skills of Indonesian youth and nurturing their entrepreneurship skills. In todays world, harnessing the power of technology and innovation is critical to get ahead," she said.
The IMF chief is visiting Indonesia to participate in a high-level regional conference to be held in Jakarta, entitled, "Future of Asias Finance: Financing for Development 2015," that will discuss new financing modalities for the regions dynamic emerging market economies.
During the first day of her two-day visit, Lagarde also met with President Joko Widodo, Vice President Jusuf Kalla, and senior officials, including Bank Indonesia Governor, Agus Martowardojo, the Coordinating Minister of Economic Affairs Darmin Nasution, and Minister of Finance Bambang Brodjonegoro.