Infrastructure Development Programs

for Growth and Equality

throughout Indonesia

Coordinating Minister for Maritime Affairs

Luhut Binsar Pandjaitan

Bandung; September 26th, 2017

Welcome to the Wonderful Indonesia,

The Largest Archipelagic State

Merauke

Sabang• 79% waters

• 17.508 islands

[5.707 inhabited]

• 99.000 km coast

lines

• 258 million

population

80% “yes”:“Do you trust your government?”

[Gallup World Poll]

The Government of Indonesia

is the most trusted Government

3

Healthy Economic Condition:

Investment Grade Status and Projected High GDP

Investment Grade results in low interest, so that

Government Budget can be allocated more productively

Indonesia 2016 GDP: US$ 932.259 billion

Indonesia 2030 GDP: US$ 5.4 trillion [#5]

#1 China: US$ 38 T

#2 USA: US$ 23.5 T

#3 India: US$ 19.5 T

#4 Japan: US$ 5.6 T

#6 Russia: US$ 4.7 T

#7 Germany: US$ 4.7 T

#8 Brazil: US$ 4.4 T

#9 Mexico: US$ 3.7 T

#10 UK: US$ 3.6 T

Sumber: World Economic Forum

Indonesia’s Sovereign Debt Rating[Source: Standard and Poor]

4

Indonesia’s 2016 Economic Growth is High

Sulteng: 9,98%

Papua

9,21%

Sulsel

7,41%

Gorontalo

6,52%

Sultra

6,51%

Kalteng

6,36%

Bali

6,24%

Sulut

6,17%

Sulbar

6,03%

DKI

5,85%

NTB

5,82%

Malut

5,77%

Maluku

5,76%

Jabar

5,67%

Jatim

5,55%

Bengkulu

5,30%

Jateng

5,28%

Sumbar

5,26%

Banten

5,26%

Kalbar

5,22%

Sumut

5,18%

NTT

5,18%

Lampung

5,15%

DIY

5,05%

Sumsel

5,03%

Kepri

5,03%

Papua Barat

4,52%

Kalsel

4,38%

Jambi

4,37%

Babel

4,11%

Kaltara

3,75%Aceh

3,31%Riau

2,23%

Kaltim

-0,38%

National: 5,02%

1. Central Sulawesi: 9,98%

34. East Kalimantan: - 0,38%

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2009 – 2016

Economic Growth:

Global: 3.26%

Developed Countries: 1.17%

Developing Countries: 4.96%

Central Sulwesi:

Boosted by mineral processing

industries [in Morowali, etc.]

East Kalimantan:

High natural resources, but low

commodities’ price

More Productive Government Budget Allocation

Rp Trilion

Education

Infra-

structure

Health

Energy

Subsidy

US$ 305 billion budget for Strategic infrastructure Projects

20% to be provided through Indonesian Government’s budget

Jump

15levels

Ease of Doing Business

#85out of 190 countries

2017

Energy

Subsidy

2009 – 2014:

Rp 1.486 T

6

Effective and Efficient Decision and Implementation

Plenary

Cabinet Meeting

Thematic

Cabinet Meeting

Inter-Ministerial

Coordination Meeting

Ministerial Meeting

Issues | Problems

Policy

Implementation

Monitoring

7

Indonesian Human Resources are Competitive

Grandprix Thomryes Marth Kadja:

the youngest man in Indonesia

awarded Doctorate Degree [24 years]

Completed his Masters and Ph.D. at

ITB within 4 years [2013 – 2017]

8

Current Development Strategy:

Indonesia Centric, Competitiveness, Added Value

Development

StrategyCompetitiveness

Added Value

Indonesia Centric

• Prohibiting raw material export

• Facilitating SME

• Providing incentives

• Human Resource Development

• Conducive investment climate

• National – Regional Connectivity

• Promoting higher growth outside Jawa

• Accelerating infrastructure development

outside Jawa

9

56

87

126

175163

2015 2016 2017 2018 2019

Infrastructure outside Java and Village Funds

Trans-Papua Road: 4,325 km, budget Rp 15.05 T • Village Fund 2015 – 2019 [Rp trillion]

• Basic needs, infrastructure, generate local economy

• 2017: Rp 1.7 billion [US$ 130.000] per village

Presiden Jokowi

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Development of New Centers of Growth

in Strategic Locations

Policy: to develop new centers of economic

growth in the eastern part of Indonesia and

near national borders

1. Regional development based on natural

resources

2. Downstream industries

3. Developing national capacity

4. Preparing national and local human resources

Masela

Natuna

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Demographic Bonus and Education Level

Productive Age

~ 70%

Children 25%

Elderly 5%63.00%

17.70%

10.30%

5.50%

1.60%

1.80%

55.50%

20.20%

12.70%

6.20%

2.20%

3.20%

51.50%

18.90%

14.60%

7.80%

2.70%

4.60%

2010

2006

2001

• ~ 50% of Indonesian

population: Elementary

School

• ~ 5% : higher education

University

Diploma

Vocational

High School

Junior High

Elementary

School

12

28,235

3,375 4,121

5,170

3,038

8,917

3,844

Singapore Malaysia Thailand Philippines Indonesia Vietnam Myanmar

Number of

Engineers

per 1 million

population

Number of

Professional

Engineers

Total Number

of Engineers150,000 100,000 276,000 500,000 750,000 800,000 205,000

3,490 11,170 23,000 14,250 9,000 n/a

Source: Indonesia Association of Engineers [PII]

KOREA

25,310

CINA

5,730

Indonesia Needs More Engineers

• More competitive job

opportunities

• 82.000+ new engineering

school graduates in 2016

• ASEAN Economic

Community

Indonesia: 3 Engineers out of 1.000 population

Vietnam: 9 Engineers out of 1.000 population

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Integrated Morowali Industrial Park [Central Sulawesi]

Power Plant

Ferro Nickel Smelter

Residential

Processing Zone

Manufacturing

Production

2.000 ha

45% industrial

24% power plant and processing

28% residential

• Production target 3 million ton

stainless steel per year

• Total investment in 2019: US$ 7 billion

• Provides 10.500 direct workers,

30.000 indirect workers

• During construction: 20% [4.000]

Chinese workers

• Operational: <2.000 foreign workers

[<10%] in 8 plants

• Polytechnic and vocational training

programs: 300 per year

Port

Research

14

Local Content to Grow National Industries

[examples: Oil and Gas Industries]

15

37.60% 35.08% 31.81% 30.84%

48.63%

25.61%

35.57%

71.23% 71.06% 69.17%65.07%

76.95%72.18%

66.62%

60.63% 60.04% 56.82% 54.15%

67.69%

55.38% 56.77%

2011 2012 2013 2014 2015 2016 Aug-17

Goods

Services

Total

3,969.68 4,626.21

6,348.63

9,337.90

8,195.41

12,432.59

6,666.30

9,011.56

3,953.99

2009 2010 2011 2012 2013 2014 2015 2016 Aug-17Local content in services is much higher than those in goods

Average

58.78%

Transaction Value in million US$

2009 – 2017

US$ 64.52Billion

Challenges: Unequal Distribution of Growth

Economic growth follows industrial growth

Sumatera

23.0%

Jawa

57.4%

8.8% 5.6%

2.9%

2.3%

Indonesian GDP Distribution [BPS, 2014]Concentration of Industrial Growth [World Bank]

16

Inefficient Logistic Costs

15.3 13.7

15.6

11.7

14.1

4.9

Jabotabek Surabaya Medan Makasar Rata-RataIndonesia

Jepang

Transportation Cost per Total Costs [%]

• Inefficient transportation results in high logistic costs

• Improve transportation and connectivity infrastructure to reduce costs

17

“Economic Distance”

Jakarta to Singapore and to other ports in Indonesia

[example of 20ft container shipping cost]

2004, Aceh

1861, Sumbar

1833, Bengkulu

1883, Krakatau

2006, Pangandaran

1994, Banyuwangi1977, Sumba

1992, Flores

1820, Sumbawa1979, Lombien

1674, Banda

1955, Seram1996, Biak

1993, Taliabu

1969, Sulsel

1968, Sulteng

1996, Sulteng

1856, Sangihe

1918, Mindanao

1897, Mindanao

1948, Panay

1994, Mindoro

Since strong 2004 in

Aceh, earthquakes

occur ~10x more

frequently; tsunami

3x more frequently

Disaster Risk Reduction is a Must

Data Source: BMKG 18

Gunung Agung [Bali] Volcanism Activities

• 3.145 m above msl

Stratovolcano, Kecamatan

Rendang, Kab.

Karangasem

• Level IV (AWAS)

Advisory: stay away from 9

– 12 km area from the

crater

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From Waste to Resources

• National Action Plans: Assessment on marine plastic debris hotspots,

policy design, reduce plastic waste dumping to the seas

• Waste-based power plants 8 municipalities under Presidential

Regulation

• Asphalt mix in Bali and Bekasi from waste to resources, benefiting

ordinary people

20

Infrastructure Development Programs

1. Boosting national development

2. Balancing regional development

3. Improving equality

21

Indonesia Population Density Distribution

National Strategic Projects and Programs

• 245 Projects and 2 Programs

• Total investment: US$ 323.3 billionRoad: 74

Railway: 23

Port: 10

Airport: 8

Estate: 30

Housing: 3

Bonded

Zone: 3

Water &

Sanitation: 10

Dam: 54

Irrigation: 7

ICT: 4

Smelter: 6

Energy: 12

35 GW

ElectricityAircraft

Manufacturing

Sumatera61 Projects

US$ 45

billionJawa

94 Projects

US$ 72 billion

Bali & Nusa

Tenggara15 Projects

US$ 0.8 billion

Kalimantan25 Projects

US$ 43 billion

Sulawesi26 Projects

US$ 13 billion

Papua13 Projects

US$ 33 billion

Region/Nation-wide: 9 Projects + 2 Programs [US$ 98 billion]

Fishery: 1

Eastern

Indonesia2 Projects,

US$ 0.007

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• 15 new airports

• Upgrade 9 cargo airports

• Upgrade 25 airports in remote and disaster-prone areas

Port and Airport Development to Connect Indonesia

• 5 deep-sea ports: Kuala Tanjung, Tanjung Priok,

Tanjung Perak, Makassar, Bitung

• 19 Feeder Ports

• 100 sub-feeder ports

23

8276 78

6156

62 60

2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

Indonesia

Infrastructure

Development Index

LRT Jakarta – Bogor – Depok – Bekasi

Indicators

Concession period 50 years

Ridership 116.000 [2019] – 464.000 [2069]

Ticket Rp 12.000

Capex [train set, depot,

infrastructure, contingency]

Rp 28.1 Triliun

Government Budget Rp 9 Trillion

IRR 9.1% (Excluding TOD)

Subsidy [12 years] Rp 16.7 Trillion Operating in

June 2019

Kertajati International Airport, West Java

• To provide better air connectivity in West Java

• Will be connected with Toll Road

• Will be further developed as an Aerocity

Top 10 New Tourist Destinations

Lake Toba

Kepulauan Seribu

Bromo – Tengger – Semeru

Wakatobi

Morotai

Tanjung Lesung

Labuhan BajoMandalikaBorobudur

Tanjung Kelayang

• Improving infrastructure,

environment, promotion, and

local people participation

• “Single Destination, Single

Management”

• Target: 20 million

international tourists in 2019

26

Tourism Road Map

27

• Tourism competitiveness index

• International tourist visit

• Domestic tourist visit

• Contribution to GDP

• Foreign Exchange

• Job Opportunities

2014 Target in 2019

• 15%

• Rp 240 T

• 13 million

• 9 % [Rp 946 T]

• Rp 120 T

• 11 million

• #30

• 20 million

• 275 million

• #70

• 9 million

• 250 million

mac

rom

icro

Indonesia as a global tourist destination

meg

a

Number of Tourist [2014]:

Blobal, Asia – Pacific, ASEAN,

Indonesia

Malaysia: 23,1 million

Singapore: 15,1 juta million

Thailand: 29,8 juta million

Top 5 – Indonesia Tourism

1. Price competitiveness

2. Prioritization

3. Natural resources

4. Cultural resources

5. Air connectivity

Bottom 5 – Indonesia Tourism

1. Environmental Sustainability

2. Health and hygiene

3. Tourist service infrastructure

4. ICT readiness

5. Security and safety

Tourism as a Prime Mover of Economic Growth

• Contributes 10% of national

GDP, the highest in ASEAN

[2015]

• The growth is above other

industries

• Revenue: 9,3% of national [#4]

• Contributes 9.8 million jobs

[8.4%]

• Job opportunity grows 30% in 5

years

• Low investment on job

providing: US$ 5.000/worker

28

0

5

10

15

20

25

30

2015 2016 2017 2018 2019

USD

Ju

ta

Minyak Batubara Pariwisata CPO Karet

Projected Revenue

The Future Relies on Technology and Human Resources

High tech cluster eco-system

• Anchor tenants

• Research centers of companies and universities

• Universities, education institutions

• Government support: regulatory one-stop, subsidies, public

schools, infrastructure and transportation

• Start up ecosystem: startup companies, angel investors,

venture capitals, accelerators, professional services,

outsourced services

• Living and working: residential, commercial, hotel, utilities,

transportation

• International connectivity: airports, ports China Industrial Cluster

Songdo

Smart City

Singapore One North Project

Potential Industrial Ecosystem for Indonesia

• Agriculture, fisheries and forestry:

smart farm and fishery

• FinTech: given low penetration of

banking and high reliance on cash

• High tech manufacturing production

base for ASEAN countries

• Logistics and IT based

transportation management

• Recycling and renewable energy

• Big data based on 250 million

people: e-Government, etc.

30