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INDONESIA – FOUNDATION OF ASEAN

INDONESIA – FOUNDATION OF ASEAN. 17 October 2013. DR. John Scott Younger D irector PT Nusantara Infrastructure Tbk. Honorary Research Fellow Glasgow University. The Country. Archipelago of 17,000 islands; 5000km East – West 4th largest country by population

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INDONESIA – FOUNDATION OF ASEAN

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  1. INDONESIA – FOUNDATION OF ASEAN 17 October 2013 DR. John Scott Younger Director PT Nusantara Infrastructure Tbk. Honorary Research Fellow Glasgow University

  2. 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)

  3. The Country • 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

  4. 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

  5. Performance Issues • Bureaucracy • Impact of Regionalisation • Lack of Infrastructure • Education • Corruption • Human Resources Skills

  6. Regionalisation • 1998 - 1999 • Provinces (34) • Regencies and Cities (400) • Budget Allocations; central to regional • Special Jurisdictions – Aceh and Papua

  7. 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

  8. 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

  9. Poverty Gap Regional income disparties between Java-Bali and rest wildening Discrepancies manifest in nutritious food, health care, educational facilities, watsan Widening differences between urban and rural development

  10. 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

  11. 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 income/capita (below average Rate of growth in many autonomous regions half that of pre-decentralisation Tough economic decisions avoided/ put off Now more open to global competition

  12. Political Scene • 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

  13. MP3EI Framework Document 22 areas of focus 6 Corridor Masterplan Needs to be driven from regions Infrastructure, Education, HR Development, etc

  14. 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

  15. Education

  16. Change in 2014?

  17. nusantarainfrastructure.com Thank You

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