T

he government is calling for Rp 668.34 trillion in infrastructure development through public-private partnerships (PPP) by 2014 to reach its 7 percent growth target and increase job opportunities and public welfare, senior government officials say.

Lukita D. Tuwo, Deputy National Development Planning Minister, said on Wednesday that the nation’s total infrastructure needs for 2010 to 2014 topped Rp 1,923.7 trillion (US$225.07 billion), almost half of which would be funded by the central government and regional administrations via the state budget.

State-owned enterprises would invest Rp 340.85 trillion, while the remaining Rp 668.34 trillion would come from the private sector through the PPP scheme.

“Economic growth will not happen without supporting infrastructure development,” Lukita said at the Indonesian International Conference Focus on the Indonesian Economy (IICFIE).

“Inadequate infrastructure is the second-most problematic factor for business.”

Lukita said there would be incentives for investors in the PPP scheme, such as reducing income tax (PPh) land and building tax (PBB) and import duties and making business licenses easier to obtain.

He also highlighted the “slowly increasing” infrastructure investment to gross domestic product (GDP) ratio, currently at about 4 percent, which has not yet reached the pre-1997 crisis level of 7 percent.

“The challenge for us is to accelerate investment in infrastructure.”

Lukita said the PPP scheme would be beneficial for investors as it could reduce capital investment and debt and improve cost effectiveness and efficiency, as cost and design were determined beforehand with budget certainty.

PPPs also enhance multiplier effect, as more infrastructure projects create more employment and minimize risks since the government does not retain construction payment risks, cost overruns, long-term operating budget responsibilities or unpredictable factors, he added.

Coordinating People’s Welfare Minister Agung Laksono told attendees that Indonesia had launched the Master Plan for Acceleration and Expansion of Economic Development (MP3EI) program to address the infrastructure problem.

“[The program] is expected to complete the infrastructure necessary for accelerating economic development,” Agung said in a speech read by his deputy, Agus Sartono.

The master plan would need Rp 4 quadrillion in investment for 2011 to 2025 to boost the country’s GDP to approximately $4.5 trillion by 2025, making Indonesia among the world’s 10 largest economies.

Investment is key to fulfilling the development programs in six economic corridors: energy-related development in Sumatra; industry and services in Java; mining in Kalimantan; agriculture, forestry and fisheries in Sulawesi and North Maluku; tourism and food in Bali and Nusa Tenggara and natural human resources in Papua and Maluku.