After more than a year watching state-owned enterprises (SOEs) control infrastructure projects, Indonesia’s local businesspeople may feel relieved to know that the government has ordered SOEs to give up more room for local firms to participate in infrastructure development.

President Joko “Jokowi” Widodo warned state-owned construction firms on Wednesday not to create a “one man show” in the government-backed projects as wider access for private companies was needed to further develop their capacity in boosting infrastructure projects throughout the regions.

“They must be involved in the right way. Increase the labor-intensive projects and invite more local contractors in the regions, the small and medium ones, so they will learn about handling big projects,” he said.

The President made the call during a Cabinet meeting at the State Palace, aiming to boost the economy through infrastructure projects while also reducing disparities in the country.

Under the Jokowi administration, Indonesia has actually seen its Gini ratio decline to 0.394 in 2016 compared to 0.402 in 2015. A lower Gini ratio indicates more income equality in a country.

However, the President wants to slash the ratio even further and the country is relying on infrastructure projects to create more jobs for the low income segment of the population. Bambang Brodjonegoro, the head of the National Development Planning Board, said that around 40 percent of the state budget would be funneled into infrastructure projects this year.

Detailing the President’s call, Public Works and Public Housing Minister Basuki Hadimuljono said SOEs were actually prohibited from working on medium-scale infrastructure projects with investment values below Rp 50 billion (US$3.73 million).

They are even barred from establishing joint ventures with other SOEs in infrastructure projects and are obliged to work with private companies. These partnerships will transfer knowledge to local private construction firms so that they will be ready to work on bigger projects in the future, he added.

“For example, in a dam project, Waskita Karya is not allowed to form a joint-partnership with Hutama Karya. They must invite in local private companies,” he said.

The government, according to Basuki, has also encouraged the public’s participation in small-scale infrastructure projects valued below Rp 200 million, such as irrigation and sanitation projects, by directly appointing community groups to orchestrate the development.

“We nurture the community and create a legal base for them to work in the [infrastructure] projects. I think we have generally implemented what the President is instructing,” he said, adding that the direct appointment scheme had been applied since 2015.

Center of Reform on Economics (CORE) economist Mohammad Faisal welcomed the government’s plan to reach low-income people through infrastructure spending, especially due to the fact that economic disparities in Indonesia still persisted despite the country’s lower Gini ratio.

“The lower Gini ratio does not reflect the government’s success in alleviating poverty, but instead reflects the falling income of the upper-middle class in the wake of a sluggish global economy. The incomes of upper-middle class people is closely correlated to global trade,” he told The Jakarta Post.

To systemically cut down on economic disparity, Faisal said the government must provide low-income people with decent jobs and adequate basic services such as education, health and affordable staple goods in rural areas.

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