Work is carried out on a railway project near Soekarno-Hatta International Airport, Tangerang, Banten, Friday (14/7). The airport train has long been awaited by the public as an alternative mode of transportation with a set schedule and being free from severe traffic jams.
The World Bank has again reminded us about the need for more private investor involvement in enhancing Indonesia\'s sluggish development of infrastructure.
The vital role of the private sector is recognized by all parties. World Bank president Jim Yong Kim estimates that Indonesia will need US$500 billion in the next five years for infrastructure development. In the 2014-2019 period, the 2014-2019 National Mid-Term Development Plan estimates the need will reach Rp 5.519 quadrillion. Of that amount, only about 40 percent can be covered by the state budget. About 10 percent is expected to come from regional governments, 20 percent from state-owned enterprises and 30 percent from the private sector.
The government announced that 57.5 percent of strategic infrastructure projects had been offered to private companies and 245 projects were ready to be carried out in cooperation with the private sector. However, private sector involvement has not been as high as expected.
World Bank data show that Indonesia has been left behind in infrastructure development, with minimal infrastructure development in the last 18 years. Only during the Joko Widodo-Jusuf Kalla administration has infrastructure development been accelerated and made a priority. Unfortunately, lately the ambition to boost infrastructure has lost its impetus.
The government has been forced to repeatedly cut spending and the development of infrastructure even though there is more fiscal space after the abolition of fuel subsidies and the introduction of the tax amnesty. Continuing to increase debt is also not an option because it would affect fiscal sustainability and macroeconomic stability.
We realize that it is impossible to continue depending only on the state budget. The key is the private sector. We appreciate the government\'s move to continuously improve the investment climate, including through fiscal incentives and the introduction of 13 reform and deregulation packages.
Various breakthroughs have also been made, including the establishment of special institutions in charge of coordinating the acceleration of infrastructure development, government-private sector partnership schemes, financing schemes and convenience in land acquisition.
However, conditions in the field show that there are still many obstacles that hinder the involvement of the private sector. These include, as mentioned by the World Bank, 100 regulations related to government and the private sector partnerships that are considered to be inconsistent.
Greater persistence is needed on the part of President Jokowi to move all the institutions under his authority to work faster, at full speed and remove all obstacles that hinder private sector involvement. The government possibly also needs to direct state-owned enterprises to increasingly focus on infrastructure projects that are less attractive to the private sector so that their presence will not discourage the private sector from competing with state-owned enterprises.
Financing innovation by maximizing domestic sources of financing also needs to be carried out. Besides the state budget, we still rely on traditional financing sources, such as banking. There is a lot of potential in domestic financing that has not been maximally utilized, including pension funds, insurance and instruments such as sukuk.
