Indonesian President Unveils Ambitious Five-Year Economic Development and Infrastructure Plan
According to a December 19 report by the Jakarta Post, Indonesian President Joko Widodo announced at the National Development Planning Conference on December 18 the Indonesian government’s medium-term reform agenda and economic development plan for 2015–2019, which set specific targets for boosting domestic production, stimulating economic growth, and improving fiscal balance. Widodo stated that Indonesia’s robust domestic demand is currently met largely through imports, posing a challenge to the country’s food and energy sovereignty and security. He emphasized that the government will abandon past misguided public policies and adopt a new approach to economic development, with particular emphasis on marine-based infrastructure development. Widodo noted that Indonesia boasts fertile land and favorable natural conditions, having long been an agricultural nation, with enormous potential for producing staple crops such as rice, sugar, soybeans, and corn. The country has ample capacity and potential to achieve food sovereignty, and the government is committed to attaining self-sufficiency in rice within three years, eliminating the need to import rice and other grain products.
According to the report, President Joko Widodo has set ambitious targets for Indonesia’s economic development, aiming for significant improvements in macroeconomic indicators by 2019. Specifically, economic growth is expected to rise from this year’s 5% to between 6.7% and 8.3%; inflation is projected to fall from 7.6% this year to between 2.5% and 4.5%; and the budget deficit is slated to decline from the current 2.4% to 1%. To boost output of staple commodities, the government plans to increase production of rice, corn, soybeans, sugar cane, beef, and fish to 82 million tons, 23.4 million tons, 1.02 million tons, 3.4 million tons, 460,000 tons, and 40–50 million tons, respectively, by 2019—representing increases of 17%, 25%, 14%, 21%, 16%, and 60% over current levels. In terms of infrastructure development, the Indonesian government intends to construct 49 large dams, develop 24 modern ports, build 15 new airports, and add a total of 35 million kilowatts of power-generation capacity. It will also step up investment in road and rail transport infrastructure, with plans to build 1,000 kilometers of new expressways over the next five years and expand the country’s railway network from its current 5,434 kilometers to 8,692 kilometers. Industrial growth is targeted to accelerate from the current 4.7% to 8.8%, while the sector’s contribution to overall economic growth is expected to rise from 20.7% to 21.6%. Furthermore, the number of foreign tourists is projected to increase from the current 9 million annually to 20 million, with tourism’s share of economic growth rising from 4.2% to 8%.
To achieve the aforementioned objectives, the Indonesian government plans to implement the following key measures. First, it will reallocate funds saved through reductions in fuel subsidies and cuts to government spending, directing these resources primarily toward infrastructure projects and other productive sectors that promote economic growth. Second, it will relax investment restrictions imposed by oversight mechanisms, effectively address difficulties in land acquisition, enhance the efficiency of government operations, and vigorously attract foreign investment. Starting in January 2015, the central government will introduce a “one-stop” service model, under which the Investment Coordinating Board will serve as the single point of contact for all investment-related procedures. Third, it will strengthen the capacity of government agencies and relevant project-planning bodies and improve budget execution rates. Fourth, it will prioritize the development of manufacturing and tourism, increasing foreign-exchange earnings in U.S. dollars and other hard currencies by attracting international tourists and enhancing export competitiveness, thereby improving the country’s balance of payments.
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