Indonesia Infrastructure Initiative - 22 November 2011
The Masterplan for Acceleration and Expansion of Indonesian Economic Development (MP3EI), which was launched in May, is a brilliant breakthrough for Indonesia's economic progress that should be realised. It should not just be words, because then the people will ultimately be disappointed.
MP3EI is believed capable of turning the wheels of the economy even in remote areas. The Ministry of Development Planning/Bappenas is even optimistic that MP3EI projects will be able to draw in 9.7 million workers.
The budget allocated to support the MP3EI program is huge, namely, Rp 3,775.9 trillion. This huge budget consists of principal investment activities that are valued at Rp 2,225 trillion and expected to create 4.7 million jobs. While investment in supporting activities (infrastructure) will absorb a budget of Rp 1,551.4 trillion, which is expected to create more than 4.9 million jobs.
Allocating such a large budget has to be done linearly and in proportion to the expectations of all levels of society. Therefore, from initial implementation, the central government must work in synergy with the regions. We should not let the masterplan that has been prepared in this way to eventually fall by the wayside road simply due to a lack of coordination between central and local governments.
Approaches to Solutions Given that the MP3EI program is an incredible breakthrough for the government of SBY-Boediono, its realisation must be completely real. SBY and the ministers associated with this program must provide evidence that the program which is going ahead is not an empty placard. So the economic team which is now the backbone of MP3EI must convince people that this program can deal with a variety of problems facing Indonesia in the future.
As conveyed by President Susilo Bambang Yudhoyono, MP3EI has been formulated in the spirit of “not business as usual”, and there are three main points in it to hold onto. First is prioritising new strategies and policies, with emphasis on approaches to solutions rather than thinking about the problems encountered.
Second is a focus on accelerating economic transformation by applying the increased value added approach, encouraging investment, sectoral and regional integration, and facilitating acceleration of private investment in line with needs. Third is that MP3EI will listen to feedback and opinions from all parties, ranging from business actors to local governments.
The long-term calculation (until 2025) for MP3EI program implementation requires a scale of priorities for implementation in the field. A scale of priorities is needed so that the desired outcomes can be achieved, and not stay in the clouds.
The first priority appears to have already been carried out by the government by developing regional potential through the six economic corridors (Sumatra, Java, Kalimantan, Sulawesi, Bali-Nusa Tenggara, and Papua-Maluku Islands). The development of these six economic corridors will be able to encourage investment by state enterprises (SOEs), domestic private companies, and foreign direct investment (FDI).
The development of these six economic corridors is being done in conjunction with resolving various constraints in the regions, revising the regulations, and bureaucratic policy. By developing the potential of these six corridors, the government can build commitment with investors from the outset
Employment PotentialAmong the many benefits that can be derived, one substantial potential that can be realised with the presence of MP3EI is opening up labour markets. According to Bappenas, the composition of the labour force absorbed by implementing MP3EI projects is 32% from the formal sector, and 68% from the informal sector.
That means the empowerment of people categorised as unemployed can be optimised to support MP3EI development projects. A huge number of information workers can be redirected to work on various infrastructure projects, such as roads, airports and railway tracks.
Bappenas estimates that around 9.7 million workers can be absorbed by MP3EI project work. That would clearly be very helpful to government programs to reduce unemployment and increase the people’s prosperity.
To date, the information worker sector has always made Jakarta and several major cities in Java the destination for speculators. As a result, since there are not enough places to absorb informal workers, social disease has arisen caused by accumulated unemployment.
With the development of the six economic corridors integrated under the MP3EI program, the informal labour sector can be transferred to the regions. This transfer of informal workers to the regions included in the six economic corridor program will automatically reduce the burden of unemployment in the major cities.
In the blueprint for the development of the six economic corridors, the largest job creation site will be Kalimantan. Based on the estimates, the total investment to support development of the economic corridor in Kalimantan will be Rp 779 trillion, absorbing more than 1.7 million workers. In second place is Papua and the Maluku Islands, where an estimated 1.4 million workers can be absorbed with total investment of Rp 450 trillion. This investment covers the nickel and copper mining, agriculture, oil and gas and fisheries sectors.
Total workers absorbed will be even greater if the MP3EI program and the development of the six economic corridors is integrated in practice in the field. In terms of policy, the MP3EI program and the six economic corridors each have their own system of implementation. However, since they have the same purpose, both programs must go along together, side by side, and support each other.
Integrating the two programs is relatively easy and can be done, because they are still under a coordination framework that is under the control of the Coordinating Ministry for Economic Affairs. Having a single system of coordination, control and supervision in the field will make things easier. However, the Coordinating Ministry for Economic Affairs, which is under the control of Hatta Rajasa, must place quality human resources that are capable and committed to the advancement of the nation.
The writer is operational director at the Developing Countries Studies Centre (DCSC) for Indonesia.
