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Govt to build more industrial estates

The government will develop integrated industrial areas and technology parks in a number of regions throughout the country as part of President Joko “Jokowi” Widodo’s program to accelerate economic growth, a senior economic minister has said

Grace D. Amianti (The Jakarta Post)
Jakarta
Wed, November 26, 2014

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Govt to build more industrial estates

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he government will develop integrated industrial areas and technology parks in a number of regions throughout the country as part of President Joko '€œJokowi'€ Widodo'€™s program to accelerate economic growth, a senior economic minister has said.

Coordinating Economic Minister Sofyan Djalil said in Jakarta on Tuesday that in addition to better investment policies, the development of integrated industrial estates was also needed to boost the country'€™s economy.

Sofyan argued that a bolstered manufacturing sector would allow Indonesia to lessen its reliance on imports, which has severely hurt the country'€™s balance of payments in the past few years.

'€œThe manufacturing industry should be revitalized in order that it can employ a greater workforce,'€ he said during the DBS Asian Insight seminar held in Jakarta on Tuesday.

'€œFiscal policy should be directed toward creating jobs, building infrastructure and boosting investment in development. For example, we must provide an optimum electricity supply in every region,'€ he said.

Sofyan said the government was still preparing incentives to encourage development in the integrated industrial areas.

The planned industrial areas, which will include affordable housing, schools and healthcare facilities for the workers, will be built in Kalimantan and Sulawesi, as well as in coastal areas of eastern Sumatra and Central and East Java.

'€œWe will also allocate investment to build ports, toll roads and railways to serve the areas, so that they will be more cost-effective,'€ he said. The government plans to fund part of the development projects from the state budget, he said.

According to Sofyan, the president has ordered all ministries to reduce their non-substantial spending, especially officials'€™ travel and meeting costs, which now reach
Rp 41 trillion (US$3.36 billion). This amount will be reduced to Rp 25 trillion, resulting in Rp 16 trillion of fresh funds.

'€œWe will save a lot of money from the reduction of government spending and fuel subsidies. It will be allocated to infrastructure and to help people in less productive sectors, such as fishermen,'€ he said.

On Nov. 17, President Jokowi announced a reduction in fuel subsidies, allowing the government to allocate a larger slice of the state budget to development programs, as he promised during his election campaign.

Jokowi at that time pledged to reform Indonesia'€™s burdensome and poorly targeted fuel subsidies, which had been forecast to amount to Rp 276 trillion next year, accounting for around 15 percent of total state spending.

The amount spent on fuel subsidies is higher than the country'€™s annual infrastructure spending. The immensely costly subsidies are considered to have little impact on economic growth or people'€™s welfare, especially as the policy mostly benefits car and motorcycle owners, who tend to come from the middle classes.

National Development Planning Board (Bappenas) head Andrinof Chaniago said the government was also planning to build '€œTechno Parks'€, or industrial areas for IT and technology-based industries, which would cost around Rp 10 billion each, with financing being sourced from corporate social responsibility funds.

Andrinof said the government would build a total of 100 techno parks next year, as mentioned in a scheme in the state budget. The government expects that the number of parks will reach 500 by 2019, he added.

'€œThe parks'€™ function will depend on the characteristic of the regency or city. For example, techno parks in cities will be oriented toward industry, while those in villages will focus on agriculture,'€ he said.

Meanwhile, Finance Minister Bambang Brodjonegoro said the reduction in spending on officials'€™ travel and meeting costs would be incorporated in the revised 2015 State Budget (RAPBN-P).

DBS Bank economist Gundy Cahyadi added that the country had three to five years to begin implementation of structural economic reform, despite a bleak global outlook.

'€œThe situation is uncertain following the fuel-price hike and BI rate hike, but future developments should strengthen the rupiah,'€ he explained.

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