T

he government has to lure more private investments into the country in a bid to maintain growth momentum as economists projected the impacts of the government’s spending will diminish by the end of this year’s first half.

Asian Development Bank (ADB) economist Priasto Aji said the government would need support from private investments to help construct its infrastructure projects as government spending would run at a slower pace from July because of shrinking revenues.

He advised the government to enhance private participation in project delivery through state-owned enterprises (SOEs) and public private partnership (PPP) schemes, to name two.

“The investors have the money but [on the other hand] they need ready-to-execute infrastructure projects so they can start construction quickly,” he said on the sidelines of a seminar in Central Jakarta on Wednesday.

He admitted that currently the country lacked such projects because problems surrounding land acquisition and government guarantees, for example, still lingered.

The government, together with the Financial Services Authority (OJK), must also make efforts to make the financial sector be more inclusive in order to open wider funding access for projects run by private investors, Priasto said.

“It is important for the government to successfully implement its investments so the precedent can boost private investors’ confidence,” he asserted.

According to the government’s estimate, this year’s state revenues will be short by about Rp 290 trillion (US$22 billion), compared with the planned Rp 1.82 quadrillion. Falling global oil prices will lead to a revenue loss of Rp 100 trillion, while a sluggish economy will result in about Rp 190 trillion
in lost taxes.

Data from the Central Statistics Agency (BPS) shows that government spending surged by 6.56 percent year-on-year (yoy) from July to September last year and 7.31 percent yoy between October and December, compared to only 2.21 in the first quarter and 2.28 percent in the second quarter.

The speedy disbursements seemed to truly help jack up Indonesia’s gross domestic products (GDP) value growth from 4.67 percent in the second quarter of 2015 to 4.74 percent and 5.04 percent in the third and fourth quarter, respectively, making the full year growth stand at 4.8 percent, lower than the 5 percent recorded in 2014.

The government is aiming for a 5.3 percent economic growth this year, while the ADB pins a slightly lower figure of 5.2 percent.

Priasto said that it was the time for the government to develop other business sectors, such as transportation, tourism and e-commerce, as new sources of economic growth amid plummeting commodity prices and low global demand for manufactured products.

The University of Indonesia’s Institute for Economic and Social Research (LPEM) research head, Febrio Nathan Kacaribu, expressed a similar view, saying that technology-driven sectors would play a key role in expanding the economy in this year’s second half amid a manufacturing recovery that had yet to speed up this year.

“It’s true that the sector is knowledge and technology intensive, but actually it’s supporting other sectors, including packaging, transportation, logistics and warehousing, which are labor intensive,” he said at the same event.

As a response to the mushrooming startup companies and stellar growth of e-commerce in the country, the government has allowed full foreign ownership for e-commerce marketplaces valued above Rp 100 billion as stated in its 10th economic policy package announced in February.

“The government is already in the right track luring more foreign direct investments,” Febrio said, adding that an open and efficient economy would benefit the public as it boosted competitiveness and allowed a transfer of knowledge.