WEDF 2012: General Session
Indonesia’s Plan for Connectivity: The MP3EI project, a good practice showcase
The General Session, which concluded this first day’s proceedings at WEDF 2012, was moderated by Prof. Djisman Simandjuntak, economist and member of the National Economic Committee of Indonesia, presented a case study of good practice in trade facilitation. Indonesia’s Master Plan for Acceleration and Expansion of Economic Development (MP3EI) is an ambitious 15-year strategy, launched in 2011, that aims to promote sustainable economic growth in the country by improving infrastructure across the archipelago and connecting the country to the world.
Dr. Ir. Lukita Dinarsyah Tuwo, Indonesia’s Vice-Minister of National Development Planning and Chairman of the National Development Planning Agency, presented the initiative to delegates. He recalled that over the past three years, Indonesia has been growing at an average annual rate of more than 6% despite the global economic crisis. However, growth is currently concentrated in the islands of Java and Sumatra, and the Indonesian government has concluded that to sustain and expand growth it needs to spread development to other regions. As an archipelago with 6,000 inhabited islands, connectivity within the country, as well as to the wider world, is vital for economic development.
MP3EI aims to facilitate more inclusive economic growth by establishing six economic corridors, focusing on 22 sectors, developing infrastructure in partnership with the private sector and removing bottlenecks to doing business by improving regulation. The sectors selected for each of the six corridors reflect the economic potential of each region. Since the strategy was launched in 2011, several laws have been passed to promote private-sector investment, including laws on land acquisition, public-private partnerships (PPPs) and information and communication technologies (ICTs). It is estimated that the total investment required to implement the initiative is around US$ 50 billion. Infrastructure expenditure has been winning a growing share of Indonesia’s budget since 2010, demonstrating government commitment to trade facilitation.
Implementation of the strategy is subject to quarterly reporting on progress to the public, and there has already been significant progress. In 2011, two new special economic zones (SEZs) were established focusing on palm oil and tourism. To support the new SEZs, road, rail and sea transportation infrastructure is being put in place. In early 2012, ten major infrastructure projects were launched and a total of 32 projects will have been launched by the end of the year.
The MP3EI strategy aims to contribute to the a capita GDP in Indonesia from around US$ 3,000 in 2010 to US$ 14,000 in 2025 and US$ 44,500 in 2045.
Dr. Edimon Ginting, Senior Country Economist at the Asian Development Bank’s Indonesia Resident Mission, emphasized the importance of MP3EI as a poverty reduction strategy that embraces all stakeholders, including government and the private sector. He drew attention to the value-driven approach of the strategy to broaden the base of the Indonesian economy. Poverty in Indonesia tends to be concentrated on less-connected islands where economic activity is mainly confined to the informal sector. Creating more productive employment is needed to reduce poverty. Dr. Ginting noted that MP3EI has been criticized for slowness of implementation, but he stressed that infrastructure development takes time. When probed about the ambitious nature of the plan, he reminded WEDF of the examples of China and Korea and their development paths.