Indonesian Government Aims for Extensive Development with S$547 B
Business, Finance

Indonesian Government Aims for Extensive Development with S$547 B 

Indonesian President Joko Widodo is preparing for the second presidential term. Although the results of the Indonesian general election 2019 have not been announced yet, according to the initial vote count President Jokowi is leading the race.

The Jokowi government has announced a development budget of S$547 billion this year, even after massive infrastructure gap warning issued by the World Bank.

According to the estimate provided by the World Bank, in comparison with the other prominent markets, Indonesia has an infrastructure gap of $1.5 trillion. Jakarta experienced a rise to 72nd rank in 2017 from 120 in 2014, as per the World Bank’s Ease of Doing Business report.

Joko Widodo in his first term of five years as the president, created a plan of infrastructure development of worth $372 billion. The plan included the construction of airports, highways and ports. However, in the second term, the Jokowi government might experience challenges to boost the economic development and rebuild the infrastructure of the country.

Amidst the slow world growth, tensions in US-China Trade Deal and ever changing oil prices, an economic development with a target of 5.3 percent growth this year and a growth of 5.5 percent in 2020 might be a little difficult to achieve.

Even though the unemployment rate has been the lowest in the past 20 years with 5.34 percent, underemployment is becoming a serious concern for the government to handle. Current account deficit rise to almost 3 percent of the GDP and the drop in foreign direct investment are also some of the challenges government would have to take care of while rebuilding the infrastructure to increase the economy of the country.

The government of Joko Widodo is looking forward to enact an ambitious plan, which includes a budget of S$567 billion (around US$412 billion). This project involves the construction of as many as 25 airports and power-plants to fuel the economy of the country.

While the government will give 40 percent of the budget, state-owned enterprises will be contributing in the 25 percent of the budget with private sector providing the remaining amount. According to the draft provided by the ministry, about 60 percent of the budget will be spent towards the development of construction-related infrastructure. While 17 percent of the infrastructure development budget will be spent in energy sector, irrigation sector will see improvement with 10 percent of the budget.

Bambang Brodjonegoro, one of the ministers in the Joko Widodo government, in regards with the rebuilding of the economy said, “The only way for Indonesia to have higher economic growth is connectivity. We are planning to establish the equivalent of a highway for the skies by building airstrips or smaller airports for connectivity” in remote areas such as the Papua region.

With underemployment, increased current account deficit and a drop in foreign investment – rebuilding the economy with infrastructure and achieving a growth of 5.3 percent might prove to be a cumbersome task for the current government. However, such plans might help the country in ending these challenges as well and leading towards a developed future.

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