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INDONESIA – FOUNDATION OF ASEAN 17 October 2013 © 2012 PT Nusantara Infrastructure Tbk DR. John Scott Younger Director PT Nusantara Infrastructure Tbk. Honorary Research Fellow Glasgow University nusantarainfrastructure.com The Country • Archipelago of 17,000 islands; 5000km East – West • 4th largest country by population • Population of 245 million; 60% in Java • Good demographics for next 20 years • Largest Muslim country (88% of population) • Rapidly urbanising • Greater Jakarta now is the second largest conurbation worldwide (30 million) © 2012 PT Nusantara Infrastructure Tbk The Country • • • • • • Wet tropical climate Agriculturally rich: Rich in wide range of mineral commodities 40% of world’s geothermal Large hydro potential East Indonesia – highest sunshine hours But underperfoming © 2012 PT Nusantara Infrastructure Tbk Some Major Economic Parameters 10th largest global economy (7th by 2025) 40% of total ASEAN GDP Average annual GDP $3,500/ capita Annual GDP growth 6% + Jakarta > $12,000/ capita Of $500/ capita in 2000 © 2012 PT Nusantara Infrastructure Tbk Performance Issues Bureaucracy Impact of Regionalisation Lack of Infrastructure Education Corruption Human Resources Skills © 2012 PT Nusantara Infrastructure Tbk Regionalisation 1998 - 1999 Provinces (34) Regencies and Cities (400) Budget Allocations; central to regional Special Jurisdictions – Aceh and Papua © 2012 PT Nusantara Infrastructure Tbk Issues 246m (2014) to 306m by 2040 Government target to double prosperity; need >7% GDP Readjustment in progress; GDP 5,0 – 5,5%; down from 6,3% Growth fuelled by external demand for new materials and expanding consumer markets; good economic government But no added value © 2012 PT Nusantara Infrastructure Tbk Issues Large young demographic structure; of low growth in employment opportunities (2.8%) against labour increase of 8,6% Steady urbanisation; declining and aging agricultural sector Acute problem of capacity building © 2012 PT Nusantara Infrastructure Tbk Poverty Gap Regional income disparties between JavaBali and rest wildening Discrepancies manifest in nutritious food, health care, educational facilities, watsan Widening differences between urban and rural development © 2012 PT Nusantara Infrastructure Tbk Stagnation and Reduced Productivity High natural resources prices has led to overvaluation of Rupiah exchange rate Consequences Stagnation in manufacturing exports Industrial growth overall less than half that of early 1990s Need to raise Total Factor Productivity - investment in infrastructure Value added per employee has declined since 2008 (employment opportunities/ increasing potential number of employees © 2012 PT Nusantara Infrastructure Tbk Political Dimension 5 years span for political appointment leads to focus on short term, quick yield developments (to impress voters) Negative impact on forestry and poor distribution of mining license Downside of Decentralisation Failure to raise (below average income/capita Rate of growth in many autonomous regions half that of predecentralisation Tough economic decisions avoided/ put off Now more open to global competition © 2012 PT Nusantara Infrastructure Tbk Political Scene • • • • • Currently main topic of conversation Move from aristocracy to democracy 6 presidents since Independence in 1945 New president in 2014 Potential Candidates: Prabowo, Megawati, Bakrie, Hatta Rajasa, Jokowi, Wiranto and possibly others © 2012 PT Nusantara Infrastructure Tbk MP3EI Framework Document 22 areas of focus 6 Corridor Masterplan Needs to be driven from regions Infrastructure, Education, HR Development, etc © 2012 PT Nusantara Infrastructure Tbk Infrastructure Need about USD 50-60bn/annum MRT, Monorail, Airport Rail Never achieved New airports and upgrading old Power supply levels/ safety margin dangerously low Water – 400 projects; few large, mostly small to medium © 2012 PT Nusantara Infrastructure Tbk Education © 2012 PT Nusantara Infrastructure Tbk Change in 2014? © 2012 PT Nusantara Infrastructure Tbk nusantarainfrastructure.com Thank You © 2012 PT Nusantara Infrastructure Tbk