I

ndonesia should continue to prioritize the upgrading of national infrastructure alongside ongoing structural reforms in order to improve the business climate and fully exploit the country'€™s economic potential, experts and officials have suggested.

Speaking on Wednesday in a seminar on structural reforms in emerging Asian markets, Bank Indonesia (BI) deputy governor Perry Warjiyo said in Indonesia'€™s case, efforts to streamline bureaucracy and promote changes to the way the government works would help boost infrastructure development and human capital.

'€œImprovements in electricity infrastructure, for example, could increase national economic growth by an average of 0.26 percent per year,'€ Perry said at the event, jointly held by the central bank and the Asian Development Bank (ADB).

By the end of 2015, Indonesia had more than 55,523 MW in installed capacity, with 2.458 MW added to the national electricity system last year.

As of December, the electrification ratio stood at 88 percent.

In an attempt to boost economic growth, the government plans to procure 35,000 MW of additional electricity over the next several years to support the growing industrial sector.

According to a simulation enacted by BI and ADB, higher electricity capacity could contribute an additional 0.33 percent growth in Sumatra, 0.18 percent in Java, 0.63 percent in Kalimantan and 0.22 percent in parts of eastern Indonesia.

Improvement in electricity would also bode well for employment, increasing labor take-up by 0.13 percent nationwide. Kalimantan is projected to benefit most from the improvement, with employment up 0.25 percent, the simulation suggested. When combined with human capital development, the improvements will boost national gross domestic product (GDP) by an extra 0.52 percent and labor absorption by 0.65 percent.

'€œWe also need simpler business licensing and procedures. That will encourage economic growth from the investment side,'€ Perry added.

The Finance Ministry'€™s fiscal agency (BKF) head, Suahasil Nazara, meanwhile, said the government had introduced budget reforms and fiscal stimuli plans to achieve sustainable growth. The government is looking at 5.3 percent GDP growth in 2016, up from last year'€™s achievement of 4.8 percent.

He reiterated the government'€™s intention to prioritize infrastructure development, citing massive infrastructure spending allocated in the state budget.

The government has allocated Rp 313.5 trillion (US$23.81 billion) from this year'€™s state budget for infrastructure development, an increase from Rp 290.3 trillion in 2015. It has also slashed electricity subsidies to Rp 38.4 trillion in 2016 from Rp 73.1 trillion last year to make way for greater spending on infrastructure.

Former finance minister Chatib Basri, also speaking at Wednesday'€™s discussion, said that infrastructure reforms needed to include business players in the export-oriented sectors to avoid past mistakes, when capital inflow was almost solely channeled to domestic-oriented sectors.

'€œWe have started to receive significant capital inflow again, directed toward exports, so that they are naturally hedged and reduce foreign exchange risk,'€ he said.