Indonesia targets US$450b worth of infrastructure projects in the next 5 years

Maritime spending to take up 15% of total amount.

During the DBS Asian Insights Conference Indonesia on Tuesday, Minister of National Development Planning (Bappenas) Andrinof Chaniago shared the government’s 5-year plan that is aimed to strengthen economic fundamentals in the longer-term.

Infrastructure development is crucial andthe government targets some USD 450bn worth of projects within the next 5 years. Spending in the maritime-related projects will be the biggest of all, making up some 15% of the total amount.

Energy and electricity generation, as well as, road-building are also key target areas for the government.
Bappenas estimates that private sector funding for these projects will make up some 30% of the total amount. That means an average of USD 27bn of private sector investment in infrastructure works is needed every year now until 2019.

Here’s more from DBS:

It is not a small amount as it is roughly equivalent to the outstanding liquid assets in the domestic banking industry currently. And for that reason, Chaniago also reiterated that the government welcomes foreign investors. Indeed, as long as it is not just about commodities, the country is still very much open for business for foreign investors. 

Infrastructure development is a long process. It is hard to judge the success of the government’s 5-year plan in a short timeframe that is sometimes demanded by financial market participants. But 2015 will be the first test for the government to prove its worth in ensuring effective public-private partnerships. A lot of scrutiny will be on the energy sector, as structural reforms are badly needed here. Yet, unlike road-building or the maritime revolution, the problems in the energy sector are often associated with inefficient bureaucracy and rent-seeking behaviours more than anything else. President Widodo and his team will do well if they can continue to tackle the challenges on this front.