Transcript INDONESIA

INDONESIA –
FOUNDATION OF ASEAN
17 October 2013
© 2012 PT Nusantara Infrastructure Tbk
DR. John Scott Younger
Director
PT Nusantara Infrastructure Tbk.
Honorary Research Fellow
Glasgow University
nusantarainfrastructure.com
The Country
• Archipelago of 17,000 islands; 5000km East –
West
• 4th largest country by population
• Population of 245 million; 60% in Java
• Good demographics for next 20 years
• Largest Muslim country (88% of population)
• Rapidly urbanising
• Greater Jakarta now is the second largest
conurbation worldwide (30 million)
© 2012 PT Nusantara Infrastructure Tbk
The Country
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Wet tropical climate
Agriculturally rich:
Rich in wide range of mineral commodities
40% of world’s geothermal
Large hydro potential
East Indonesia – highest sunshine hours
 But underperfoming
© 2012 PT Nusantara Infrastructure Tbk
Some Major Economic Parameters
10th largest global economy (7th by 2025)
40% of total ASEAN GDP
Average annual GDP $3,500/ capita
Annual GDP growth 6% +
Jakarta > $12,000/ capita
Of $500/ capita in 2000
© 2012 PT Nusantara Infrastructure Tbk
Performance Issues
Bureaucracy
Impact of Regionalisation
Lack of Infrastructure
Education
Corruption
Human Resources Skills
© 2012 PT Nusantara Infrastructure Tbk
Regionalisation
 1998 - 1999
 Provinces (34)
 Regencies and Cities
(400)
 Budget
Allocations;
central to regional
 Special Jurisdictions –
Aceh and Papua
© 2012 PT Nusantara Infrastructure Tbk
Issues
246m (2014) to 306m by 2040
Government target to double
prosperity; need >7% GDP
Readjustment in progress;
GDP 5,0 – 5,5%; down from
6,3%
Growth fuelled by external
demand for new materials
and expanding consumer
markets; good economic
government
But no added value
© 2012 PT Nusantara Infrastructure Tbk
Issues
Large young demographic
structure; of low growth in
employment
opportunities
(2.8%)
against
labour
increase of 8,6%
Steady
urbanisation;
declining
and
aging
agricultural sector
Acute problem of capacity
building
© 2012 PT Nusantara Infrastructure Tbk
Poverty Gap
Regional income disparties between JavaBali and rest wildening
Discrepancies manifest in nutritious food,
health care, educational facilities, watsan
Widening differences between urban and
rural development
© 2012 PT Nusantara Infrastructure Tbk
Stagnation and Reduced Productivity
High natural resources prices
has led to overvaluation of
Rupiah exchange rate
Consequences
Stagnation in manufacturing exports
Industrial growth overall less than half
that of early 1990s
Need to raise Total Factor
Productivity
- investment in infrastructure
Value added per employee has
declined since 2008 (employment
opportunities/
increasing
potential number of employees
© 2012 PT Nusantara Infrastructure Tbk
Political Dimension
5 years span for political appointment leads to
focus on short term, quick yield developments (to
impress voters)
Negative impact on forestry and poor distribution
of mining license
Downside of Decentralisation
Failure to raise
(below average
income/capita
Rate of growth in many autonomous
regions
half
that
of
predecentralisation
Tough economic decisions avoided/
put off
Now more open to global competition
© 2012 PT Nusantara Infrastructure Tbk
Political Scene
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Currently main topic of conversation
Move from aristocracy to democracy
6 presidents since Independence in 1945
New president in 2014
Potential Candidates: Prabowo, Megawati, Bakrie,
Hatta Rajasa, Jokowi, Wiranto and possibly others
© 2012 PT Nusantara Infrastructure Tbk
MP3EI
Framework Document
22 areas of focus
6 Corridor Masterplan
Needs to be driven from regions
Infrastructure, Education, HR Development,
etc
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Infrastructure
 Need about USD 50-60bn/annum
 MRT, Monorail, Airport Rail
 Never achieved
 New airports and upgrading old
 Power supply levels/ safety
margin dangerously low
 Water – 400 projects; few large,
mostly small to medium
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Education
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Change in 2014?
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Thank You
© 2012 PT Nusantara Infrastructure Tbk