Thursday, 17 October 2013


One of the tangible features of the progress of a country was good, adequate and well maintained infrastructure. The USA and European states had excellent infra-structure, so it was not surprising that they were in the state of advance nations since the 19th century.

In Asia, perhaps only Japan, South Korea, Singapore, Hong Kong, Taiwan and China could equal America and the USA in terms of the infra structure. As with China, economic advancement was only seen in the past decade as they spurred on infra structure development. The huge population, around 1.6 billion people did not keep them from developing the Government even saw infra structure development projects as means to put more of their people to work.

By theory, good infra structure needed budget allocation of 5% of GDP of a nation. So if Indonesia’s GDP this year was around Rp 8,200 trillion, the size of budget for infrastructure in APBN State Budget should be around Rp 410 trillion.

Unfortunately in the past or present APBN state budget the portion for infrastructure never exceeded Rp 200 trillion. Meaning, infra structure development in Indonesia was still left behind against that in other Southeast Asian countries. And yet it was understood that good infra structure was the pre-requirement for drumming up foreign investors. Some international rating agencies had defined infra-structure as one of the key components of nation’s competitiveness.

As a matter of fact the condition of infrastructure, especially roads in Indonesia was still bad and way behind even other ASEAN countries. And yet infra structure was pre condition to economic and social development. Increase of 1% of infra structure would step up GDP increase by 1%. hence it seemed right if infra structure building became a priority.

There was still four months left before this year was over. The Government must make the best of the remaining time to jack up budget absorption in infra structure projects. Considering that infrastructure projects were multi-year project, the Government must prepare sufficient fund to finance infra structure projects for the on-going year and the years to come. If there was left over fund from other budget posts each year, as long as it was politically and legally justifiable to use the fund for infra-structure building, it was advisable that the carry over fund be entirely used.

Infrastructure restoration, especially road building and restoration became strategic and indispensable. The use-worthy status of roads were not just for public convenience but they were also vital for good business climate.

Many surveys unveiled that bad infra-structure means extra burden of 17% of the average expenditure of each company resulting in high cost economy. Business climate was no longer attractive while business could not run well. In the end it was the consumers and the public who were being disadvantaged by the stagnated transportation. Unfortunately, infrastructure projects were always handicap by the limited budget which had its impact on degraded quality or reduced scope of projects.
Only trouble was that downgrading of roads quality was made worse by corruption practices. Hence the commitment to infra-structure upgrading must also be accompanied by the commitment to safeguard budget spending. The limited budget must be spent 100% on target achievement without spill over here and there. Admittedly, to be true to commitment might be easier said than done.

It should be understood that to be use worthy for infra structure was more than just a matter of good construction but also to be properly designed and be functional as medium of connectivity. Supposedly business players were playing more active role in enhancing infra structure development.

A sound evident of how bad infrastructure affected economy could be seen in India. India’s economy grew by 4.4% in quarter II of 2013, the lowest since 2009. The condition forced India’s monetary authority to anticipate slump of Indian Rupee. Analysts put the blame on investment slowdown, high inflation and low export, so India’s economic performance was below projection, which was originally targeted at 4.7% and the underlying cause was poor infrastructure.

India was now struggling to win back investors’ trust and to strengthen the value of Rupee against USD. Released data had it that this downturn was happening three times consecutively which led the India Government to underscore their economy. India’s economic growth percentage was at the lowest level since 2009, when India and other developing countries had to face financial crisis.

To learn a lesson from India and Indonesia’s own experience, the Government of RI must be aware of the importance of prioritizing infrastructure development. So far the problem was not in the budget because the entire budget in the APBN had been sufficient, but in the management of budget and funding.

To be exact, the Government and House [the Budgeting Board] must have proper mindset and share the same perception about increasing allocation for infra-structure development and reduce allocations for less significant sectors. “Less significant” should be understood as not bringing any direct or indirect benefit on economy. For example travel expenses for Government officials, which could be reduced significantly. It was a matter of political will not of justice of injustice.

Toward change of Government to be in office next year, it was advisable for the present Government to will admirable souvenir for the next Government in the form of good infra-structure. And naturally the next Government should continue the process of building basic infra structure overlay. Indonesia's competitiveness through basic infra structure would be at stake when the ASEAN Economic Community was in effect by January 1, 2016.

Business News - September 6, 2013

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