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RI to benefit from G20 infrastructure hub
Indonesia has been advised to take advantage of the multi-year Global Infrastructure Initiative and Hub established after the latest G20 Summit, as leaders of the worldâs largest economies committed to supporting infrastructure investment to spur global growth
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ndonesia has been advised to take advantage of the multi-year Global Infrastructure Initiative and Hub established after the latest G20 Summit, as leaders of the world's largest economies committed to supporting infrastructure investment to spur global growth.
Tackling global investment and infrastructure shortfalls was crucial to lifting growth, job creation and productivity, the G20 leaders said in a communiqué released after their meetings in Brisbane, Australia last week.
This would be done through the establishment of the Global Infrastructure Initiative to facilitate long-term financing from institutional investors, as well as a Sydney-based hub that would provide the resources and expertise necessary to promote the multi-year agenda.
G20 member countries will voluntarily support the hub, which will require US$10-15 million annually and will have a four-year mandate.
Countries outside the G20 group could also benefit from the expertise and resources provided by the hub, which will be in collaboration with international organization and development banks to promote the development of quality infrastructure.
'The Global Infrastructure Initiative established in Australia provides huge opportunity for Indonesia to further develop its infrastructure projects,' Chatib Basri, an economist from the University of Indonesia (UI), said on Monday.
Chatib noted that emerging economies played an important role in the global economy, as they contributed to around 40 percent of global growth but still faced problems in connectivity and infrastructure, thus preventing the global economy from growing to its full potential.
G20 member countries targeted to raise their combined economic growth by an additional 2.1 percent from the current level by 2018.
The leaders pledged to address data gaps and improve information on infrastructure projects, as well as facilitating long-term financing from institutional investors.
Allocating further resources and expertise to infrastructure was an effective strategy to spur global growth, said Chatib, a former finance minister who was involved in various G20 meetings in the past.
'In the case of Indonesia, what we need is perfection in the preparation of infrastructure projects, especially related to land procurement and business permits,' he added.
President Joko 'Jokowi' Widodo has committed to redirecting unproductive spending such as fuel subsidies to growth-generating projects such as infrastructure, in his vision of spurring Indonesia's economic growth to 7 percent, a level last achieved before the 1997-1998 financial crisis.
- Global Infrastructure Initiative and Hub established
- New organization expected to facilitate financing from institutional investors, provide resources, expertise
- Will have four-year mandate, require $10-15m funds per year
More than Rp 120 trillion ($9.8 billion) of additional funds will be available for infrastructure projects next year if Jokowi proceeds with his plan to increase the prices of subsidized fuel by 40 percent, according to official estimates.
Nevertheless, questions linger on whether the Indonesian government has the capacity to properly spend the funds earmarked for infrastructure projects due to bureaucratic red tape and a lack of project planning capacity.
As of September this year, the government only managed to spend Rp 59.8 trillion of capital expenditure funds, or 37.2 percent of its total allocation.
'Amid prevailing uncertainty in the global economy, domestic growth drivers such as government spending and infrastructure development will become increasingly important,' Aldian Taloputra, the chief economist of Mandiri Sekuritas, said on Monday.
To achieve higher economic growth in 2015, Indonesia would have to rely on the ability of the new government to ease business permits and improve the investment climate for infrastructure projects, said Aldian, who predicted that the economy would grow only by 5.3 percent next year, falling short of the government's 5.8 percent target.
