In order to boost infrastructure development, the government needs to open more opportunities for private sectors to be involved, considering that the state’s fiscal capacity is still low.
The year 2018 is only days away. During the past month, several predictions of the future economic condition have been emerging. The more sophisticated term is ‘economic outlook’. In general, forecasts from experts or scientific institutions predict a bright future for the Indonesian economy.
However, most forecasts are accompanied with notes about several things that the government should improve and anticipate. The Institute for Economic and Social Research of the University of Indonesia (LPEM UI), for instance, predicts a slight economic growth from 5.2% this year to 5.3% in 2018. According to them, consumption growth is rather weak. However, it could improve if investment in the real sector increases and higher commodity prices is maintained. They added that the growth in 2018 and probably in 2019 will be mainly driven by investments and exports.
The institute, which is under the University of Indonesia’s Faculty of Economy and Business, reckoned that external risks are still under control, as indicated by the capability of some central banks in increasing reference rates without disrupting the financial market.
Nevertheless, they reminded that in order to boost infrastructure development, the government needs to open more opportunities for private sectors to be involved, considering that the state’s fiscal capacity is still low.
As an attempt to reach higher and fairer growth, the government under President Jokowi’s leadership has placed the infrastructure sector as the main agenda and allocated a great deal of budget to boost this sector.
Although theoretically infrastructure development can accelerate economic activities and hence increase growth, according to LPEM, reality has not revealed so. Even though budget allocation for the infrastructure sector in 2017 is 177% more than that in 2014, the economic growth this year has only crept up a little.
“This development is for the whole nation; whether in villages, outskirts, outermost islands, and border areas.” – Jokowi, President of the Republic of Indonesia
“Job creation which has been promoted as one of the benefits from infrastructure and construction spending has yet to be observable as well,” the LPEM report says.
Long term
In a seminar about infrastructure last October, Finance Minister, Sri Mulyani, said that Indonesia needs to develop infrastructure and facilities to cater for the primary needs of the people and to improve social welfare which has not been realised optimally.
The Minister said that as a unitary state encompassing thousands of islands, development in the infrastructure sector is urgent in order to establish connectivity and promote social justice in the political, legal, and economic aspects. “Of course the [positive] effects won’t be instantly observable,” she said.
Economist of the Institute for Development of Economics and Finance (Indef), Enny Sri Hartati, also commented along similar lines. During a discussion in Jakarta, Thursday (23/11), she said that infrastructure development indeed has its own timeline, but it does not mean that the positive effects are instantly observable. Enny said that infrastructure projects are still causing financial strain to the nation, as infrastructure projects worth thousands of trillion rupiah are not complete yet, and thus their tangible impact on the state revenue have not been noticeable during these short and medium terms.
Sri Mulyani admitted that the challenges in infrastructure development encompass not only the financing, but also adequate institutional arrangement required to meet the infrastructure availability target including fund sources, schemes, institutions, and results. The required measure to overcome such challenges, among others, is by harmonizing stakeholders’ interests and creating an innovative and creative financing scheme.
According to Presidential Regulation No. 79/2017 on the 2018 Government Work Plan, settling infrastructure issues is still a major government agenda, second only to boosting investments. The purpose is no other than for equal distribution of growth and development. “The development we are working on together is not only for people living in the cities, but for the whole nation, whether in villages, outskirts, outermost islands, or border areas,” said Jokowi on one occasion.
Source: MetroTV
Source: MetroTV
