Implementing Indonesia’s Economic Master Plan (MP3EI): Challenges, Limitations and Corridor Specific Differences pot

Implementing Indonesia’s Economic Master Plan MP3EI: Challenges, Limitations and Corridor Specific Differences 1 Executive Summary The Government of Indonesia announced the Master Plan

Implementing Indonesia’s Economic Master Plan (MP3EI): Challenges, Limitations and Corridor Specific Differences

June 2012

Prepared by Strategic Asia

Table of Contents

The Concept of an Economic Corridor 12

Economic Corridors in Indonesia 12

Implementation Phases of the MP3EI 15

Barriers to Implementing the MP3EI 16

Public Communication and Awareness 17

Synergy with the RPJP and the RPJM 19

Regulatory Reform 21

Institutional Reform 23

Infrastructure 25

Regional Disparities 29

Human Resource Development 33

Financing and Attracting Private Sector Investment 35

Environmental Sustainability 38

Differing Perceived Opportunities and Barriers to Implementing the MP3EI at the National Level and in the Kalimantan and Bali- Nusa Tenggara Corridors 43

Implementation Requirements and Recommendations for the MP3EI 47

International Experience of Implementing Economic Corridors 47

A Closer Look on East-West Economic Corridor of Greater Mekong Sub-region (GMS): Turning Infrastructure Corridors into Economic Corridors 47

The Indonesia-Malaysia-Thailand Growth Triangle 51

Roles of Stakeholders in the Implementation of the MP3EI 54

Current Structure of the KP3EI 55

Level of Preparedness 57

Sequencing 57

Recommendations for the Implementation of the MP3EI at the National Level 59

Implementation Recommendations in the Kalimantan Corridor 60

Implementation Recommendations for the Bali- Nusa Tenggara Corridor 61

Conclusions 62

REFERENCES 64

ANNEX 67

Figures

Figure 1 - MP3EI Economic Corridor Map 11

Figure 2 - Estimated Investment Required for the Main Economic Activities of the MP3EI 14

Figure 3 - Implementation Phases of MP3EI 15

Figure 4 - Barriers to Implementing MP3EI 16

Figure 5 - Infrastructure Projects Under Construction 28

Figure 6 - Total Projects and Total Investments in the MP3EI 29

Figure 7 - Regional Inequality in Indonesia 30

Figure 8 - Indications of Investment in 6 Economic Corridors 32

Figure 9 - Factors for Doing Business in Indonesia 36

Figure 10 - Perceived Opportunities at the National Level 43

Figure 11 - Perceived Barriers to Implementation at the National Level 43

Figure 12 - Perceived Opportunities in the Kalimantan Corridor 44

Figure 13 - Perceived Barriers to Implementing the Kalimantan Corridor 44

Figure 14 - Barriers in the Kalimantan Corridor broken down by frequency of mention: 45

Figure 15 - Perceived Opportunities in the Bali- Nusa Tenggara Corridor 45

Figure 16 - Perceived Barriers to Implementing the Bali- Nusa Tenggara Corridor 46

Figure 17 - Barriers in the Bali- Nusa Tenggara Corridor broken down by frequency of mention: 46

Figure 18 - EWEC Linkages to National Development Plans 50

Table Table 1 - The Economic Activities Promoted by the MP3EI per Corridor 13

Boxes Box 1 - Key Points from the Low Carbon Economy Knowledge Hubs 41

Box 2 : EWEC Flagship Projects 47

Box 3 IMT-GT Five Connectivity Corridors 51

Implementing Indonesia’s Economic Master Plan (MP3EI): Challenges, Limitations and

Corridor Specific Differences 1 Executive Summary

The Government of Indonesia announced the Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI) in May 2011 This has been followed by almost constant debate surrounding the feasibility and the implementation challenges likely to be faced

by the MP3EI The fact that such an overwhelming amount of interest has been generated about the MP3EI shows the willingness of stakeholders to take part in realising the success of the policy It also demonstrates that not enough attention has been paid to implementation mechanisms and frameworks during the design phase of the MP3EI itself

The MP3EI is a very ambitious plan It aims to propel Indonesia into the top ten economies and raise per capita from US$3000 to US$15,000 by 2025 The policy rests on three main pillars: establishing six economic corridors based on the comparative advantage of the different regions

of Indonesia; promoting connectivity within Indonesia and the ASEAN region, as well as improving human resources and science and technology

Implementation of the MP3EI, however, is its Achilles heel The MP3EI document itself dedicates a relatively short space to map out the implementation and monitoring of the policy This ambitious policy needs a strong implementation strategy to ensure its success

At the national level, there are nine major barriers to the implementation of the MP3EI: a lack of socialisation and awareness; unclear synergy with the RPJMN (Indonesia’s long term development plan); needs for both regulatory and institutional reform; underdeveloped infrastructure; regional disparities; a need for human resource development; a lack of available national financing and disincentives to private investment and a perceived clash with committing

to environmental sustainability

Barriers found for the Kalimantan and Bali- Nusa Tenggara Corridors are found to be different,

although all stemming from a general theme at the national level As such, recommendations for the implementation for the two regional corridors are not the same

This indicates that each of the six Corridors will be unique in their implementation strategy

Indeed, the MP3EI states that each corridor has its own theme based on the comparative advantage of that region Furthermore, implementation relies on a number of factors such as levels of infrastructure, human resources, institutional capacity, amongst others As such, it is likely that the implementation experiences from one Corridor cannot be copied to another This suggests then, that the idea of using a pilot corridor should not be undertaken, but instead all six corridors be implemented simultaneously Implementing the first phase of the MP3EI should

1

The UK Foreign and Commonwealth Office in Jakarta contracted PT Strategic Asia Indonesia between August

2011 and April 2012 to undertake a project looking at the implementation barriers, requirements and recommendations for the MP3EI

occur at the same time as the implementation of increased research and planning to develop human resources, invest in science and technology, developing basic infrastructure as well as a regulatory and institutional reform

General recommendations for the national level are:

The first task is to create effective on the ground awareness and familiarity with the objectives, design and key stages of the Master Plan At present, Government officials at the national level overall had a much better understanding on the meaning, opportunities and requirements for implementing the MP3EI as compared to the private sector and civil society

A clear set of expectations from different groups of stakeholders needs to be established,

as now there is cross over in expectations of different stakeholders- particularly between the private sector and government officials Increased available information for the private sector as well as inclusive public communication are the first steps in establishing

a long term working relationship between the private sector and government to implement the MP3EI

A regulatory review to ensure that the MP3EI can be supported by laws and regulations which are streamlined through the regional and national level

MP3EI Working Units need to be established which coordinate regularly with the national level These groups should involve a breadth of stakeholders and their targets and quarterly progress should be made available as public information

Improving basic infrastructure should be seen as a national government priority in order

to attract private investment in commercial infrastructure

An Action Plan needs to be developed on looking at the short and long term needs of developing human resources in each of the six corridors At the moment, it is not clear in the MP3EI where funding is to be sourced to establish training centers and other resources develop Indonesia’s man power The MP3EI document lays out a breakdown for the infrastructure budget, but there is a lack of a breakdown of a budget for human resource development

An Action Plan needs to be established on the strategies when moving from an infrastructure to an economic corridor learning from the international experience

The national PPP framework needs to be reviewed, projects need to synergize between the national and regional level, with only feasible projects which are ready to commence advertised The President also needs to take the lead at the national figurehead for the development of PPPs in Indonesia

A review of the financing budgeted for the eastern parts of Indonesia needs to be carried out as eliminating regional disparities are a priority for the MP3EI but yet there is a lack

of financing in eastern Indonesia which acts as a barrier to growth and also private investment

An important theme in the implementation of the Kalimantan Corridor was the perceived clash with efforts to become more environmentally sustainable Connectivity was an important issue as

at the moment there is a lack of sharing of information between Kalimantan’s four provinces, however this was much more of a prominent theme in the Bali- Nusa Tenggara Corridor since this corridor aims to pull together a series of islands Eastern Indonesia also has more prominent issues in underdeveloped basic infrastructure and human resources, far much more than Kalimantan As such, special attention should be given to the Bali- Nusa Tenggara Corridor as well as other eastern Corridors in constructing basic infrastructure with the overall aim to reduce regional disparities

In terms of sequencing, similar to the East- West Economic Corridor of the Greater Mekong Delta Sub- Region, the MP3EI has dedicated the first phase of the implementation process from

2011 to 2015 as solely in infrastructure investment The purpose behind this is to increase the inter-corridor connectivity and set basic foundations for the second phase The East West Economic Corridor found relative success in the infrastructure phase, and significant increased trade and investment flows as a result However, difficulty was found in the move from an infrastructure corridor to an economic corridor

For the second phase of the MP3EI, covering the period from 2015 to 2020, attention needs to move further down to the regional level After infrastructure corridors are established, the regional government should have a better awareness and ability to fulfil its roles Increased responsibility at the regional level for implementing MP3EI would serve as a faster method of implementation rather than at the national level and each Corridor would be able to adapt to its local situation easily The MP3EI should not be bound to a one size fits all policy, but the regions should have the capacity to implement the policy according to the different needs and abilities of each corridor

Introduction

Background

The Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI) is the government’s most prominent economic development policy in the last decade This ambitious policy aims to leapfrog Indonesia into the ten biggest economies by 2025, by increasing GDP to US $4.5 trillion as well as by increasing GDP per capita income from US

$3000 now to US $15,000

Under Presidential Regulation No 32/2011, President Yudhoyono launched the MP3EI policy in May 2011 and the policy was supported by sectoral ministries, local governments and state- owned enterprises The MP3EI has huge potential to develop economic growth through the promotion of six economic corridors: the Sumatra Economic Corridor, the Java Economic Corridor, the Kalimantan Economic Corridor, the Sulawesi Economic Corridor, the Bali- Nusa Tenggara Economic Corridor and the Papua- Kepulauan Maluku Economic Corridor

The MP3EI policy centres around three main strategies: to develop the six national economic corridors, to speed up the development of human resource capacity and national science and technology which will feed into the long term support of such accelerated economic development

The total investment required for the six corridors is Rp 4,012 trillion From this total, it is expected that the Sumatra Corridor will receive Rp 714 trillion (18% of total investment), the Kalimantan Corridor will receive Rp 945 (24% of total investment), the Java Corridor will receive Rp 1,290 trillion (32% of total investment), the Sulawesi Corridor will receive Rp 309 trillion (8% of total investment), the Bali-Nusa Tenggara Corridor will receive Rp 133 trillion (3% of total investment) and lastly the Papua- Kepulauan Maluku Corridor will receive Rp 622 trillion (15% of total investment)

The Master Plan identifies eight primary programs and 22 primary activities as the focus of national development The eight primary programs are: agriculture, mining, energy, industrial, marine, tourism, telecommunications and the development of strategic areas The strategic initiative of the Master Plan is to encourage large-scale investment in 22 primary activities: shipping, textiles, food and beverages, steel, defence equipment, palm oil, rubber, cocoa, animal husbandry, timber, oil and gas, nickel, copper, bauxite, fisheries, tourism, food and agriculture, the Jabodetabek area, the Sunda Straits strategic area, transportation equipment, and information and communication technology

Fundamental to the MP3EI policy is the importance of promoting a new way of thinking- “Not Business as Usual” This new ideology is to come from increased collaboration and inputs from national government, local governments, state-owned enterprises, private sector companies and local communities

The Indonesian Government has limited funds to finance development through its State Budget (APBN) According to the MP3EI, 44% of the total investment needed is expected to come from

the private sector and state-owned enterprises Under the MP3EI, all existing regulatory frameworks must be evaluated, and strategic steps must be taken to revise and change regulations in order to attract such support from investors Incentives will be implemented on tariffs, taxes, import duties, labor regulations, licensing and permits and land procurements In order to achieve these goals, the central and local governments must build a stronger link within and beyond the centers of economic growth

Although the policy lays out a promising plan to advance Indonesia’s economy, it has often been noted that its Achilles heel is in the implementation stage Others have noted that the Government’s previous large scale development acceleration programmes in Indonesia have not fulfilled their promises, such as the 2007 Presidential Instruction on real sector development acceleration and the 2010 Presidential Decree on acceleration of poverty reduction.2

The Committee on Economic Development Acceleration and Expansion of Indonesia 2011-2025 (KP3EI) is an institution established by the President of the Republic of Indonesia on May 20,

2011 to coordinate the implementation of MP3EI

The Master Plan recognises that Indonesia must overcome a number of challenges: a failure to achieve value-added input in the agricultural and extractive industries; a developmental gap between western and eastern Indonesia; the lack of infrastructure support generally; a lack of connectivity between regions; inadequate quality of human resources and rapid urbanisation

The steps to realise the Master Plan include: bureaucratic reform, including the legislature and judiciary, tax reform and incentives, the creation of special economic zones in each of the corridors, improved shipping and airline capability (ports and airports) to promote connectivity, and increased high school and vocational training to improve human resources Many elements

in the plan are unique points of departure for Indonesia For example, the Master Plan states that the Government bureaucracy will support the needs of business and provide equal treatment and fair opportunities for all businesses, Government loans will be used to finance investment instead

of routine expenditures, such as subsidies and subsidies will be targeted at the disadvantaged rather than for goods, taxes will be on Indonesian sourced income and not worldwide income, taxes will be based on consumption rather than value added taxes, and employment regulations will be supportive of employers as well as employees

Evidence Used in the Study/Data Sources

This paper highlights the key barriers to implementing the MP3EI policy and makes recommendations for successful implementation Using an evidence-based approach, this paper makes reference to data collected during past meetings with stakeholders Since this project has mainly looked at the implementation barriers and requirements at the national level and specifically at the Kalimantan and Bali- Nusa Tenggara Corridors, the bulk of the

2

Business Section, ‘I’m not optimistic with the MP3EI: economist’, The Jakarta Post, July 25th 2011

recommendations are made for national level as well as Corridor specific recommendations for the Kalimantan and Bali- Nusa Tenggara Corridors

Data has been collated from meetings and interviews with government officials, members of the private sector and of civil society from all of the six Economic Corridors as outlined in the MP3EI PT Strategic Asia Indonesia facilitated four seminars, two at the regional level and two

at the national level in order to gather opinions from a wide range of stakeholders A market research company, the Polling Center, based in Jakarta, supported PT Strategic Asia Indonesia and undertook three rounds of interviews with project stakeholders During the length of this project, the Strategic Asia team gathered data from a wide range of sources from across the Indonesian archipelago

Field trips took place in East and Central Kalimantan, Lombok, Bali, Aceh and Makassar in order to gather area specific data needed to supplement project research, as well as to gain support for two regional seminars which occured in Kalimantan on 6th October 2011 and in Lombok on 6th December 2011 Both seminars addressed the specific needs of the regions; the first addressing the Kalimantan Corridor and the second the Bali- Nusa Tenggara Corridor In preparation for our two regional seminars, trips were made to Central and East Kalimantan for the first seminar and to Lombok and Bali for the second in order to meet key stakeholders, speakers and with the BAPPEDA offices in order to secure cooperation in co-hosting these events

Strategic Asia undertook meetings in Jakarta in preparation for the third and fourth seminar entitled ‘Climate Change Mitigation and the MP3EI’ and ‘Implementing the MP3EI on the National Level’ These seminars were both two day events and took place on the 8th

and 9th of February 2012 and 14th and 15th March 2012, respectively Apart from guests from Jakarta, both seminars also featured one international speaker from London and included participants from across Indonesia: Sumatra, Kalimantan, Sulawesi, Bali, Lombok and Papua

Strategic Asia also signed a contract with an Indonesian market research company, the Polling Center in August 2011 The Polling Center attended the Kalimantan, Lombok and the Climate Change Mitigation and MP3EI seminars to undertake one to one meetings with participants alongside the event A broad range of stakeholders were interviewed, from government officials, members of the private sector, NGOs, Universities, research organizations, and the Donor community A total of 18 interviews were conducted during the Kalimantan seminar and 20 additional interviews were conducted during the Lombok seminar After the two regional seminars, the Polling Center conducted 38 interviews in Jakarta Details of the interviewees can

be found in the Annex of this report During these three rounds of interviews, the Polling Center quantified data on the awareness of the MP3EI; views on perceived opportunities coming from the MP3EI; barriers and solutions for implementation; synergy with the RJPMN (the medium term development plan) and roles of stakeholders

Verbatim quotes from these stakeholders coming from interviews with the Polling Center can be found throughout this paper separated in text boxes

Furthermore, focus group discussions were a large feature of this project All four seminars were made up of a panel sessions with presentations as well as smaller breakout discussions with specific issues for discussion The agendas, participant attendance lists and seminar summaries for all four seminars are provided in the Annex for further information

Alongside preparation for seminars, Strategic Asia staff also met with key stakeholders in Jakarta

as part of collating and consolidating research

Extensive secondary research has also been ongoing throughout the life of this project Data has been collected from government resources, secondary literature and Indonesian and international media

Figure 1 - MP3EI Economic Corridor Map

Source: MP3EI p 46

The Six Economic Corridors

1 Sumatra Economic Corridor as a “Centre for Production and Processing of Natural Resources and As Nation’s Energy Reserves”

2 Java Economic Corridor as a “Driver for National Industry and Service Provision”

3 Kalimantan Economic Corridor as a “Centre for Production and Processing of National Mining and Energy Reserves”

4 Sulawesi Economic Corridor as a “Centre for Production and Processing of National Agricultural, Plantation, Fishery, Oil & Gas, and Mining”

5 Bali – Nusa Tenggara Economic Corridor as a “Gateway for Tourism and National Food Support”

6 Papua – Kepulauan Maluku Economic Corridor as a “Centre for Development of Food, Fisheries, Energy, and National Mining

The Concept of an Economic Corridor

The Asian Development Bank’s definitions of an Economic Corridor are as follows3

3 It emphasizes the physical planning of the corridor and the surrounding area by focusing

on infrastructure development and optimal maximization of benefits

Economic corridors aim to attract investment and generate economic activities in a particular region in view of realising the economic development potential of a given region with essential features of lower distribution costs and improved land acquisition Physical links and logistics facilitation are key elements towards achieving these aims Physical connectivity between the centres of economic growth will be significantly developed upon massive investments in infrastructure Moreover, improved infrastructure, partnered with cross-border cooperation among the neighbouring countries, can accelerate the process of integrating the country’s economic corridors into the global market Successful implementation of economic corridors requires strong political will with the placement of appropriate infrastructure as well as streamlined competitive regulations to facilitate the movement of goods and people

Economic Corridors in Indonesia

Growth centres, connectivity and infrastructure are the main building blocks of the Indonesian Economic Corridors Economic growth centres will be developed through industrial clusters and special economic zones (SEZ) These economic hubs will be developed in each economic corridor in line with the local potentials and specialisations of each region For instance, the MP3EI identifies Kalimantan as an energy hub, Bali as a tourism hub and Sumatra as an agro-industry centre These different types of economic activities need to be accompanied by improved connectivity and infrastructures links

To facilitate the movement of goods and services across economic corridors, connectivity between regions should be developed to accelerate and expand economic development Connectivity infrastructures such as construction of transportation routes and information and communication technology (ICT) within and across the regions will reduce transportation and logistical costs Infrastructure improvements in roads, seaports, airports, water, energy and electricity, and others are also needed according to the economic activity required in the main industrial clusters Therefore it is crucial for these infrastructures to be of high quality if a competitive final product is desired In addition, the provision of the various infrastructures across the corridors will need a pool of skilled workers who are experts for each type of economic activity

3 Ruth Banomyong, “Benchmarking Economic Corridors Logistics Performance: A GMS Border Corssing Observation”, World Customs Journal

Table 1 - The Economic Activities Promoted by the MP3EI per Corridor

Source: MP3EI p.48 and p.49

Figure 2 - Estimated Investment Required for the Main Economic Activities of the MP3EI

Source: MP3EI p.50

Implementation Phases of the MP3EI

Figure 3 - Implementation Phases of MP3EI

Source: MP3EI p.50

As illustrated above, Phase 1 (2011-2015) intends to focus on the implementation and operationalisation of the MP3EI implementing committee One of the action plans prepared is the debottlenecking of different pending regulations, licenses, incentives and the commencement

of investment commitment All of the pending regulations and permits at the national and regional level must be revised to support the development of main activities related to spatial management, man power planning, regional tax, application of communal land, mineral and coal mining business uncertainty, simplification of business patterns in the oil and gas industry, private sector participation in providing electricity, renewable energy, defence equipment,

railways, airports, tourism, and Public Private Partnerships (PPPs), among others See Annex for

a detailed list of the pending laws

Moreover, strengthening of national connectivity is a priority for Phase 1 by assigning primary seaports and airports as international exchange centres in western and eastern Indonesia Human resources development, research facilities, research activities and other capacity building activities will also be strengthened to serve as a good foundation for the first phase

Phase 2 (2016-2020) intends to focus on the acceleration of long term infrastructure development, increasing innovation to boost competitiveness, improvement of economic governance in various fields and the promotion of industries that will create added value

Phase 3 (2021-2025) will leverage on the competitive advantage of national industries globally and high level technology adaption for future development projects Successful implementation

of converting the infrastructure corridors into economic corridors will also take place in this phase

The Action Plan, for successful implementation of the MP3EI, will be discussed later in this report This action plan has considered the international experience specifically from the Lower Mekong Delta Action Plan and the Indonesia-Malaysia-Thailand Growth Triangle Action Plan

Barriers to Implementing the MP3EI

Figure 4 - Barriers to Implementing MP3EI

Barriers to Implementing the MP3EI

1 Public Communication and Awareness

2 Unclear Synergy with the RJPMN

3 A Need for Regulatory Reform

4 A need for Institutional Reform

5

Underdeveloped Infrastructure

6 Regional Disparities

1 Public Communication and Awareness

No other policy initiative has received either such a

high profile or so much attention in the entire period

following the collapse of the New Order

However, a lack of awareness amongst key

stakeholders is a significant finding of this project

Despite the fact that the MP3EI sets out to implement

this project in a ‘Not Business as Usual’ mindset by

involving stakeholders in a collaborative approach,

we have found that there is a disparity in awareness

and knowledge of the MP3EI amongst government

officials and members of the private sector and civil

society organizations Notably, various levels of

awareness and knowledge were also found across

different areas of Indonesia As expected, it was

government officials as a group who were the most

knowledgeable about the concept of the MP3EI

Furthermore, government officials who were

interviewed in Jakarta had a better understanding of

the MP3EI than their regional counterparts

As yet, there is no ‘virtual secretary’ or one website

dedicated to the MP3EI This acts as a barrier to

spreading awareness on the MP3EI, as there is not

one central source of information which can inform

stakeholders about the concept and ongoing

implementation of the policy Many members of the

private sector have raised this as a concern Not

having access to regularly updated information, on

relevant laws and regulations in particular, would act

as a barrier to investing, as noted by many members

from the private sector

Interviews undertaken in Kalimantan show that whilst all three categories of respondents possessed a fairly good awareness of the MP3EI, there was a tendency for the respondents from the government group to have a deeper awareness on the policy Generally, most of the participants of the Kalimantan seminar held in October 2011 were aware of the MP3EI, but some stated that they had only researched the MP3EI following the invitation of the seminar Importantly, local government officials noted that they felt that the central government were much more aware and, therefore, prepared for the implementation of the policy Interviews

during the Lombok seminar showed that from the three categories of respondents, the private

sector and civil society had a lower level of understanding of the MP3EI than government

Verbatim Quotes from the Polling Center

in response to the question on the socialisation of the MP3EI:

“…I feel that the MP3EI might be just another government strategy that has just been packaged differently…”

Private Sector, Kalimantan Seminar

“…The biggest obstacle the MP3EI faces

is the danger of conflict that will arise during the implementation since the actual planning of it was neither discussed nor consulted with relevant stakeholders and the community who lives in the targeted areas of development…”

Civil Society, Kalimantan Seminar

“ To be honest, I have only briefly heard about the MP3EI and it seems to

me that it will be much focused on the development of each respective region ”

Private Sector, Lombok Seminar

“…It is only after attending this seminar that I knew about the MP3EI…”

Government Official, Lombok Seminar

“ It is still a one-way relationship with the MP3EI… Maybe later on will the government feel it necessary to make a special effort to socialise the MP3EI ”

Government Official, Jakarta

officials Although the government had a much better understanding of the MP3EI, many answers were limited to giving the definition of the MP3EI

Members of civil society organisations in particular stressed the need to involve the indigenous people of Kalimantan in the implementation of the MP3EI As mentioned in the outcomes of the breakout sessions of the Balikpapan seminar, participants were weary of the possible rise in tensions and resistance from indigenous peoples during development policy implementation like the MP3EI Similarly during the Lombok seminar, one participant from Kupang University noted that the local customs and traditions of groups in Nusa Tenggara Timur must be respected and involved in making economic development plans, otherwise the government runs the risk of marginalising these groups, which could lead to social conflict During the National Level Seminar in Jakarta, Dr Deddy Hadriyanto from Mulawarman University raised the same concern Bapak Deddy stated that the use of traditional customary law is still very strong amongst many groups, such as the Sasak people in West Nusa Tenggara As such, there may be potential tension if drastic economic development does not respect the rights of such groups It is vital, therefore that effort is made to discuss with all groups of society about such large and important plans like the MP3EI

Furthermore, under the KP3EI (the Commission on the Acceleration and Expansion of Indonesia’s economic growth) the organisational structures set up for the implementation of the Kalimantan and Bali- Nusa Tenggara Corridors show that the majority of the people involved are government officials The President, Governors, Mayors, Para Walikota and Ministers have been allocated as main stakeholders in the MP3EI Implementation Task Teams and Secretariat Organisational diagrams to demonstrate these can be found in the ‘Action Plan’ section of this report.4

Economist Fadhil Hasan has argued that the MP3EI has been prepared as a top-down Master Plan, by the centre for the regions and that there are still many regions that are sceptical to the MP3EI plan "In order for the regions to have a sense of ownership over MP3EI, there should be further socialisation to the regions Moreover, so far, it is the governors that have been involved

in the discussions, not the regents, who have the autonomous authority," he has stated.5

Ultimately, involving all stakeholders is the only way to hear the views of the people who the policy will affect Such socialisation is necessary to achieve implementing a policy which can benefit as many as possible, which essentially is the core aim of the MP3EI

4 AusAID Indonesia Infrastructure Initiative, as taken from Kompas Newsaper, 9th June 2011

5 AusAid Indonesia Infrastructure Initiative, as taken from Kompas Newspaper, 9th June 2011

2 Synergy with the RPJP and the

RPJM

Law No 25/2004 regarding the National

Development Planning System mandated the

integration of Indonesia’s long, medium term

and annual development plans This also

indicates that the Law acts as a legal umbrella

for the implementation of development plans in

order to guarantee the achievement of the

country’s goals

The National Long Term Development Plan

(RPJPN) 2005-2025 has become the basis for

development programs for a period of 20 years

commencing from 2005 to 2025 In addition,

RPJPN 2005-2025 also serves as a guideline for

the preparation of the National Medium Term

Development Plan (RPJMN) which is a

development program 5 years in length The

question that arises here is to what extent does

the MP3EI synergise with the RPJPN and the

RPJMN?6

The majority of spokespersons in the national

media have expressed a positive attitude

towards the synergy of the policies For

example, Wahyu Utomo, the head of MP3EI

integration programme at the Office of the

Coordinating Ministry of Economic Affairs at a

conference in Yogyakarta stated that the MP3EI

programme is complementary to the National

Medium-Term Program Plan (RPJMN).7

Similarly, the Provincial Secretary of Nusa

Tenggara Barat delivered a welcoming speech

at the Lombok Seminar which expressed the

optimism that both sets of policies are aligned

Dr Ir Max H Pohan, CES, MA, Deputy

Minister for Regional Development and Local

Autonomy Affairs of National Development

Planning, BAPPENAS has stated that the two

6 National Connectivity 2011 Special Edition, Sustaining Partnership, “The Connectivity of Six Economic Corridors”

7 Wahyu Utomo speaking at MEP UGM, Yogyakarta, 23rd December 2011

the RPJP, RPJMN, and MP3EI:

“ It is synergised because the RPJPN is more

on the general approach, but the MP3EI is more focused on the national and regional economy with all its pre-requisites to achieve economic growth and push the economic growth with various conditions In this case, the regulations, mindset of the people, and institutionalisation should be right …”

Government Official, Kalimantan Seminar

“ It is synergized with two considerations (i) fairness in distribution of funds for each corridor (ii) commitment of local and central government ”

Civil Society, Kalimantan Seminar

“ The MP3EI emphasises more the role of the private sector in its implementation whereas the RPJPN focuses more on the development activities purely funded by the government…”

Government Official, Lombok Seminar

“…The MP3EI is the best amongst the existing

development plans since it basically focuses on

a long term national development plan that can only be implemented in accordance with the government’s capacity…”

Private Sector, Lombok Seminar

“ To be honest, I do not know the details of the RPJPN and the MP3EI ”

Private Sector, Lombok Seminar

“…Although not yet quite obvious, the synergies should be found since there are probably several components of the RPJPN that

is similar to that of the MP3EI ”

Government Official, Jakarta

” At the very least they should have a link They can probably complement each other with regard to developmental support As part of a business society, I expect a synergy between the MP3EI and RPJPN The important thing is that they don’t overlap or veer off the course ”

Private Sector, Jakarta

policies are complementary but that their difference lies in their implementation: the MP3EI promotes the private sector as the main actors, whereas under the RPJPN, the government is the main actor for implementation The reason for the promotion of the private sector as the main actor for implementing the MP3EI is because a large proportion of the financing for the projects

is expected to come from the private sector

Most of the stakeholders interviewed by the Polling Center throughout this project also stated that they believed that the two types of policy can synergise, since they are both based on similar founding principles

Overall, participants from the Kalimantan Seminar had the view that the MP3EI’s vision and mission are aligned with the RPJPN A few participants viewed the MP3EI as a part of RPJPN, due to its coverage areas (divided into corridors); however, since its field (MP3EI is primarily economically focused) is different from RPJPN’s, therefore, the implementation of the MP3EI’s was viewed as different from the RPJPN However, the Polling Center also found that such synergy can only occur if supported by a number of conditions including: intensive commitment and communication between the central and local government, aligned policies between the central and local government and zero-deviation from the implementation actors of MP3EI

Participants from the Lombok Seminar on the whole had the view that the two programmes can

be synergised because they viewed the MP3EI as an elaboration of the RPJPN, however they had the view that the MP3EI is focused on developing infrastructure, while the RPJPN’s scope is broader

Government officials in Jakarta who were interviewed by the Polling Center had an understanding of the differences and similarities between the RPJPN and the MP3EI However, the majority of respondents were not able to say whether the MP3EI would support the RPJPN or vice versa

Despite the fact that there is generally a good feeling that the two programmes can be aligned, it must be taken into the account that the previous section of this paper highlighted the fact that a majority of stakeholders are under informed about the MP3EI Therefore it can be argued that their knowledge of the ability of the MP3EI to synergise with the RPJPN and RPJMN is limited Furthermore, the process to assign stakeholders to implement the MP3EI is still under process, so there is not a clear policy as yet on how the tasks to implement the RPJPM, RPJMN and the MP3EI will be separated or merged

3 Regulatory Reform

Being the centre of all structural reforms, regulatory

reform is a vital component of the first phase

(2011-2015) of the Master Plan The first phase of the MP3EI

aims to:

At the national level: re-evaluate cross sector

regulations and restructure permit applications

related to spatial management, labour, taxation and

the ease of capital investments8; and

At the local level: review regulations and permits

concerning the mineral and coal, forestry and

transportation sectors as well as basic infrastructure.9

For investments in infrastructure to occur, the MP3EI

recognises that a number of regulations need to be

removed, aligned or reviewed in at least seven national

laws, seven government regulations, five presidential

regulations, presidential decrees, presidential

instructions, nine ministerial regulations and a number

of local regulations and permits 10 The Annex contains

a list of these proposed changes So far, twenty seven

regulations have been completed, eleven regulations are

being revised, and eight regulations are to be revised.11

Banking on large private sector investments means that the Indonesian government will need to create a more favourable and conducive environment that can win the trust of the private sector through orderly regulations, fewer risks for misinterpretation, increased trust and the utmost participation from investors in this process The main problem is that Indonesia currently does not have an independent regulatory review agency or an implemented Regulatory Impact Analysis Horizontal and vertical inconsistencies and overlapping laws and regulations remain major issues that upset domestic and regional investment climate as well as hurdle infrastructure projects

Findings from the Polling Center data show that constraints could arise when the concept of MP3EI is applied on the ground considering the current regulations and policies as well as worries about overlapping government policies For example, regulations and political parties which change frequently in line with changes in the political leadership represent an obstacle

11 From a presentation given by Dr Ir Dedy S Priatna, MSc, Deputy for Infrastructure Affairs, Bappenas during the

UK FCO Strategic Asia ‘Implementing the MP3EI on the National Level’ Seminar, Jakarta, 14th March 2012

Verbatim Quotes from the Polling Center in response to the question on the government regulations:

“ The biggest barrier that every investor talks about is the lack of regulations and standardised issues ”

Private Sector, Kalimantan Seminar

“ The government always restricts the flexibility of the private sector; there is not even a distinction made between ownership and contracts even though the government is in cooperation with the private sector This is the biggest obstacle faced at the moment Current regulations must be reviewed to stimulate the private sector’s work and must be backed up by the law ”

Government Official, Jakarta Seminar

much lamented by business people In light of this, it is necessary that all policy-makers and the country’s legislative body have a clear understanding and strong commitment to adhere to the principles of the MP3EI and RPJPN in making any further or revising policies and regulations Concerns from civil society about information relating to environmental regulations, the freeing

up of land, taxation, import duties, and tenders were also present Members of the private sector and civil society stated that they wanted transparent access to information and regulations related

to the programme The private sector also expressed that they desired information on new policies or changes to existing rules in both the national and regional level The private sector also felt that it was vital that such rules and regulations be amended, since the current state of inconsistent policy from province to province creates a barrier for investors Increased consistency in policy and available up to date information on policy changes will make it easier for private sector investors to easily assess the viability of investments and act quickly when they see an investment opportunity Moreover, members of the private sector and civil society are both aware of the need for clear and consistent regulations in order to get rid of investor doubts since these regulations would also affect the business players on their business expansion activities while keeping up to local traditions and customs

Delay of Land Acquisition Enactment

Despite the passing of the land acquisition bill, the parliament has postponed the issuance of its presidential regulation12 Although the government intended to issue the regulation on February

2012, it could not push through since the draft regulation submitted by the National Land Agency (BPN) still requires further discussion and clarification.13 The issuance of the presidential regulation on the Land Acquisition is expected to be finished within six months since the passing of the bill, which is June 2012 This has resulted in a prolonged process of passing a law which many see as a progressive instrument for improving the country’s physical infrastructure

To remove the reluctance of the private sector to take part on the Public Private Partnerships (PPP) programs, the finalisation of the Land Acquisition Law and Spatial Planning Law (RTRW) are essential in realising the desired huge private sector participation in infrastructure projects and in allowing the progress of the MP3EI to move forward Our findings from the Polling Center reports further implies that until this Law is passed and fully implemented, there remains bottleneck issues and confusion at the local level as to what land would be used for business pursuits, mainly in oil and gas, coal mining, and what land needs to be protected as part of the President’s commitment to reduce greenhouse gases by 26% in 2025

Enactment of Tax Holiday Regulation

In August 2011, the most anticipated tax holiday regulation (Minister of Finance Regulation No 130/PMK.011/2011) was enacted to provide two types of tax facility, namely (i) corporate income tax exemption and (ii) corporate income tax deduction An income tax exemption for five to ten years will be granted to businesses in “pioneering industries” starting from the year tax of the corporate taxpayer’s production Issuance of this regulation is expected to boost

12 Jakarta Post, “Enactment of land acquisition law delayed again”, 14th March 2012

13 Jakarta Post, “Enactment of land acquisition law delayed again”, 14th March 2012

investments in infrastructure, attract increased numbers of foreign investors, and ramp-up resource-based manufacturing industries

One of the worth mentioning stipulations under the Tax Holiday Regulation is the provision that administers the possibility to prolong the exemption or deduction of corporate income tax The provision entails two elements to be regarded which are the preservation of national competition and an evaluation of the strategic value of a particular business.14 The lack of clarity in terms of explaining when or how national competition needs to be maintained or the limitations of understanding the strategic value of a particular business may cause various interpretations of this stipulation or provision Since multiple interpretations of this provision may lead to uncertainty and ambiguity, the Indonesian government should clarify these provisions to effectively implement the goals of the Tax Holiday Regulation

Infrastructure Bonds

To help finance the needed infrastructure projects, the national government is preparing to issue infrastructure bonds Such bonds should immediately be issued in order to make plans to accelerate infrastructure development a reality By providing a government guarantee, bonds would attract investors.15 Directorate General of Debt Management Rahmat Waluyanto recently announced that such infrastructure bonds will not be issued until February or March 2012.16

2002, other regions followed soon thereafter – South East Sulawesi, West Kalimantan and Lampung Virtually all regions saw allegations of corruption emerge In 2006, there were 265 corruption cases involving local legislative bodies with almost 1,000 suspects handled by prosecutorial offices across Indonesia

14 SSEK Law firm website, “ 2011 Indonesian Law Review on Tax Holiday”, Accessed on 2 nd April 2012

15 Investor Daily, 28 November 2011, “WITHOUT EXTRAORDINARY BUDGET, MP3EI ONLY A DREAM: Infrastructure Bonds to be Issued Soon”, By Esther Nuky

16 Govt to launch global bonds in February 2012 Oleh Agust Supriadi December 19, 2011

17 Taufik Rinaldi, Marini Purnomo and Dewi Damayanti, ‘Memerangi Korupsi di Indonesia Yang Terdedentralisasi’ World Bank, May 2007

However, recent years have seen corruption on the

decline This could be due in part to increased

freedom in the media following the end of the New

Order which has encouraged public comment and

transparency in fighting corruption Indeed,

President Susilo Bambang Yudhoyono has

reaffirmed that his administration has zero

tolerance on corruption He noted that “the

Corruption Eradication Commission has been

prolific in their investigations of graft, with notable

success since its inception.”18

The international community is yet to catch up on

domestic progress on and corruption is still seen as

a problem in Indonesia Indeed, Mr Jonathan

Mantle, an international expert from London who

spoke at the National Level seminar, Jakarta, on

March 14th 2012 noted that from the international

perspective, Indonesia’s reputation for corruption is

not investable In 2011, Indonesia was ranked at

3.0 on Transparency International’s Corruption

Perception Index, rising from 2.8 in both 2010 and

2009.19 Corruption becomes a barrier since the

MP3EI relies on such large amounts of private

sector investment, including foreign investment

Coordination between the Regional and National

Government

Members of the Private Sector who were

interviewed during the ‘Climate Change Mitigation

and the MP3EI’ seminar noted that the

implementation of the MP3EI is constrained by a

lack of coordination between central and local

government, especially concerning overlapping

laws as regulations as discussed in the last section Participants from the private sector who were interviewed at the Kalimantan Seminar also argued that they receive different information on laws and practices at the regional and national level, and thus this is confusing and, as a result, is

a deterrent to investing As already discussed, a lack of awareness at the local government is currently a barrier to implementing the MP3EI This stems from a lack of an inclusive policy to share data and plans between the national and regional government David Ray, Director of the Indonesia Infrastructure Initiative (IndII), an AusAID-funded facility to promote economic

18 President Susilo Bambang Yudhoyono, in The Oxford Business Group, Indonesia edition March 2012, p 19

19 Corruption Perception Index, Transparency International, 2011 Where 10 equals a very low level of perceived corruption and 0 equals a very high perceived level of corruption

Verbatim Quotes from the Polling Center in response to the question on the coordination between the regional and national government:

“ The local government is unprepared

The implementation at the local level is not easy since the community should also be taken into account Aside from that, the RPJMN and the MP3EI should also be synchronized…”

Government Official, Kalimantan Seminar

“ There is an obstacle on the coordination between the central and the regional governments because I haven’t seen proper coordination between the two…”

Private Sector, Jakarta

“…an overlapping of authority and stipulations has happened to an extent, as well as a lack of clarity as to the developmental priorities themselves This could continue unless the regional governments will be cooperative ”

Private Sector, Jakarta

“…There is a lack of synchronization

between the centre and the regions What’s more the spirit of autonomy in the regions brings its own obstacles Also there have been clashes with communities over land disputes which have yet to be resolved – also national planning tends to overlap…”

Civil Society, Jakarta

growth through improvements in both the quality and quantity of Infrastructure in Indonesia, particularly in urban areas has spoke about the lack of coordination between the national and regional level He has stated that central to the findings of Indll’s first phase is that institutional problems, rather than resource constraints, are the primary reason for infrastructure failures.20

Change in Mindset

Throughout the project, many stakeholders have emphasised for the need of a ‘change in mindset’ at the national and regional level in order for each region to synergise commitment from all levels of government Indeed, the MP3EI needs the backing of political will from all echelons of government However, implementing this is not easy and there is no one fixed policy

to implement such change

5 Infrastructure

The national government has shown its commitment

to overcoming infrastructure challenges in the

MP3EI as well as in the current medium term

development plan (RPJMN) for 2010-2014

Deputy for Facilities and Infrastructures of

Bappenas, Dedy Supriadi Priatna, has estimated that

the investment needed to implement the six

Economic Corridors reach the magnitude of Rp

4,012 trillion Of that amount, about 43 percent, or

Rp 1,725 trillion, is needed for infrastructure

development Meanwhile, the government's

contribution is only about 10 percent in the form of

basic infrastructures, such as roads, ports, airports,

railway network, and power plants Private

companies and state-owned enterprises are expected

to play a major role to meet these investment needs

Poor Infrastructure Prevents Economic Growth

The current poor quality of infrastructure is one of

the main factors preventing Indonesia’s economy

from growing at its potential rate of 8 percent

Inadequate infrastructure also results in high

inflation compared to most of Indonesia’s peers in

South East Asia Infrastructure development has

been slow in the past decade and has relied heavily

on government spending The government has thus

far not allocated sufficient funding for infrastructure

20

AusAID Indll

Verbatim Quotes from the Polling Center

in response to the question on the provision of infrastructure:

“…To improve the qualities of infrastructure and human resources, we have to educate our human resources properly They should participate in activities such as internship, or educational training to increase their knowledge and improve their skills so that when investments come, they are not only workers, but they can also be individuals that we can form partnerships with ”

Government Official, Kalimantan Seminar

“…The infrastructure has two types: basic and social Basic infrastructure includes the roads, ports, and bridges Social infrastructure includes the Indonesian language, institutions, and regulations ”

Private Sector, Lombok Seminar

“ There must be synergy between the MP3EI and RPJPN MP3EI is oriented towards infrastructure while RPJPN generally has both physical and non- physical aspects ”

Government Official, Jakarta

development, while participation from private investors is still far below what is needed Compared to other ASEAN-5 countries, many of Indonesia’s main airports and seaports are outdated and often overcrowded.21 Meanwhile, electricity supply needs to be boosted to meet surging domestic demand

Standard Chartered Indonesia ran scenarios in February 2011 to assess the impact of infrastructure development in the transport and electricity sectors The best plausible outcomes showed that Indonesia’s economy will grow between 7.1-7.6% between 2011-2014 if the private sector participation rate reaches 50% of what is required and if the government increases spending on transport infrastructure by 20% a year.22 Importantly, if the state-owned electricity company PLN increases annual capex by 20% and if private sector participation reaches 50% of what is needed, then growth could reach 6.9-7.5% over the same period.23

Electricity

As of February 2012, the electrification ratio of Indonesia stood at 71% with a target of 75% by the end of 2012 and 90% by the end of 2014.24 There are regional disparities in the growth of this sector, with the Java Island having a much higher rate of growth compared to other regions in Indonesia Indonesia as a country also falls behind its neighbours in the region Singapore’s electrification rate is already at 100% whereas Thailand and Malaysia currently stand at approximately 90%

ICT

Indonesia currently stands at 109th place in the E-Government Index, whereas neighbours Malaysia, Singapore and Thailand stand at 32nd, 11th and 76th place, respectively A 2011 World Bank report found that increasing broadband connection by 10% results in a 1.12% increase in GDP per capita in developed countries and 1.38% in developing countries.25

Water

Eastern Indonesia lags behind in clean water supply as compared to other regions, especially Java.26 The Kapuas, Kapuas-Barito, and Mahakam river basins represent 70% of Kalimantan’s population and area, and 40% of the river basin area located inside the Heart of Borneo A change in hydrograph of the river and increased demand for water for palm oil or other agricultural sectors could lead to a lack of water in the dry season Possible water users that may experience negative impact are water companies, water-dependent industries, irrigated agricultural lands, palm oil companies and local communities.27

21 Edward Lee Wee Kok, Eric Sugandi, Fauzi Ichsan, Jennifer Kusuma, Tai Hu, Indonesia Update, Standard

Chartered Indonesia, 14 February 2011

22 Ibid

23

Ibid

24 Antara News, “PLN Targets Serving 90% of Households by Late 2014”, 7th February 2012

25 Mastel, (Indonesian ICT Society) ‘Toward National Connectivity- Challenge and Opportunity), Dr Setyanto P Santosa, Chairman of Mastel, Jakarta 21 September 2011 Presentation

26 BPS Statistics, Value of Cleaned Water Distributed (Million Rupiah) 1995 – 2008 A table showing this data can

be found in the Annex

27 Heart of Borneo: The Economics of Ecosystems and Biodiversity (HoB-TEEB) December 2011

Poor Infrastructure Prevents Private Investment

The Regional Secretary of Buleleng, Bali, Nyoman Sukarma, expressed that Buleleng's efforts to lure investors could be in vain, as the regency faced problems in meeting the increasing demand for electricity and telephone lines Due to inadequate infrastructure, economic potential is yet to

be met Despite the current availability of electricity in Buleleng, the regency, which is included

in the Java-Bali interconnection power grid, suffers power shortages due to a lack of power stations Buleleng is also an example of lack of synergy between the regional government and state owned enterprises, as the Regional Secretary stated “We can develop new roads with our budget, but the policies of state-owned electricity company PLN and state-owned telecommunications PT Telkom regulate the electricity and telephone lines I'm afraid our efforts

to lure investors will be useless without a clear policy from the two state-owned firms.”28

Stakeholder Views

The Balikpapan Seminar also highlighted the importance of investing and developing infrastructure in Kalimantan Participants argued that the opportunities created by the MP3EI would not be realised until sound infrastructure could be developed Furthermore, a presentation given by HSBC in the Lombok Seminar stressed the importance for the national and regional governments to take the lead in basic infrastructure, whereas commercial infrastructure could be left to the private sector As yet, a clear distinction from the national government between the two types of infrastructure is lacking

Power supply to support infrastructure is currently inadequate to support the implementation of the Kalimantan and Bali- Nusa Tenggara Corridors Throughout the Balikpapan seminar, many participants were weary of the irony of the fact that although Kalimantan has a huge energy resource, its own electricity supply is inefficient and often leads to unpredictable blackouts The MP3EI states that the fishing industry is one which could be expanded in Kalimantan However, uncertain supplies of electricity have meant that this area has not attracted as many investors as it would have otherwise

Priority of Infrastructure as the First Phase of the MP3EI

Realising the importance of this barrier to the MP3EI, the Indonesian government has prioritised the first three years of the implementation of the MP3EI solely to building basic infrastructure and progress has already begun Between May and December 2011, Rp 461.6 trillion has already been spent on implementing the MP3EI programme, involving 91 infrastructure and economic development projects In 2011, the budget was 20.6 trillion, and for 2012 it is expected that Rp 36.7 trillion will be spent on infrastructure

Infrastructure Projects already in Construction

The table below shows the number of infrastructure projects which have already begun in each

of the six economic corridors However, what immediately stands out is the disparity between the regions, with Java, Sumatra and Sulawesi receiving much more of the capital than other regions Many individuals from the private sector who were consulted as part of this project stated that building basic infrastructure is a necessary requirement before any investment will

28 Jakarta Post, “Asian Development Bank Calls RI’s New Economic Plan Realistic”, 14 th June 2011

take place For example, PT Chareon Pokhphand, Bali, a company specializing in selling chicken products, discussed at the National Level Seminar in Jakarta how they would want to expand towards Nusa Tenggara Timur, but were restricted by the lack of reliable electricity resources and roads in the eastern parts of the Corridor

Figure 5 - Infrastructure Projects Under Construction

Source: From a presentation given by Dr Ir Dedy S Priatna, MSc, Deputy for Infrastructure Affairs, Bappenas during the UK FCO Strategic Asia ‘Implementing the MP3EI on the National Level’ Seminar, Jakarta, 14 th March

2012

Poor Infrastructure and Regional Disparities

Figure 6 also shows that the plans for infrastructure investment allow for much higher levels of financing for the Sumatra and Java Corridors than for the remaining four Increasing investment

in infrastructure in Java and Sumatra, but failing to recognise the need in eastern Indonesia could hinder the growth and levels of investment in eastern Corridors and affect the economic growth

of Indonesia as a whole

Figure 6 - Total Projects and Total Investments in the MP3EI

Source: From a presentation given by Dr Ir Dedy S Priatna, MSc, Deputy for Infrastructure Affairs, Bappenas during the UK FCO Strategic Asia ‘Implementing the MP3EI on the National Level’ Seminar, Jakarta, 14 th March

2012

6 Regional Disparities

Essentially, the purpose of the MP3EI is to raise the GDP per capita from $3000 to $15,000 by

2025 whilst raising the living standards of Indonesia’s population Therefore, fundamental to preparing the implementation of this policy must be the priority of equaling economic growth and investment amongst the six economic corridors

Government spokespersons, for example, Dr Ir Endah Murniningtyas, M.Sc., Deputy Natural Resource & Environment, BAPPENAS, during her keynote speech at the ‘Climate Change Mitigation and the MP3EI’ seminar, discussed that the disparities of Indonesia’s regional economic growth are a huge problem Thus it is the aim of the MP3EI to focus on the development outside Java However, looking at the financing allocation in the MP3EI it can be seen that the eastern islands of Indonesia are still to receive less funding than their western

counterparts

Moreover, Dr Ir Max H Pohan, CES, MA, Deputy Minister for Regional Development and Local Autonomy Affairs, National Development Planning Agency (BAPPENAS) argued that the success of regional development determines the success of national development Therefore,

despite the fact that the MP3EI has increased national and regional funding, insufficient financing to the eastern parts of Indonesia is likely to hinder the overall growth of the country and is likely to worsen regional disparities Although not stated by Dr Pohan, allowing increased regional disparities could arguably result in unity issues within the archipelago

Figure 7 - Regional Inequality in Indonesia

Considering that the private sector have expressed a need for basic infrastructure to be in place before planning to invest, it can be argued that not funding eastern Indonesia with enough money

to secure basic infrastructure, hinders its growth and could fall further behind growth seen in Sumatra and Java Lack of financing also means that the development of human resources and science and technology are also stunted, and critically, private sector investment in such areas becomes less attractive compared to areas such as Sumatra and Java which are becoming more developed, have easier access to information, better human resources and better quality infrastructure.29

Notion of Geography in Economics

A spatially diverse nation such as Indonesia allows for great variations in the endowment of various provinces and districts and their ability to compete for a greater share of Indonesia’s future economic development Factors such as being blessed with natural resources, connectivity

29 Dr Ir Max H Pohan, CES, MA, Deputy Minister for Regional Development and Local Autonomy Affairs, National Development Planning Agency (BAPPENAS), presenting at a conference entitled ‘Implications of MP3EI

on Manpower Planning’ Jakarta 22 December 2011

and quality of infrastructure as well as a conducive business environment can set one province or district apart from the other The Java Island currently has a considerable advantage over the rest

of the archipelago due to better quality of infrastructure, higher levels of density of industry as well as higher availability of skilled labour

Varied Economic Growth in the Regions

The economy of the Sumatra region grew by 5.9% (YoY) in 2011, higher than its average growth in the last three years of 5% This economic growth has largely been supported by increasing performance of the agriculture sector, especially the plantation sub-sector of palm oil and rubber and supported by growth in the manufacturing industry The performance of the Trade, Hotel and Restaurant sector also grew by 7.5% (YoY) Similarly, economic growth in Java was also high, and in 2011, growth stood at 6.7% (YoY) This growth was supported by the performance of the industry and trade sectors Export growth was also high in Java- from 16.3%

in the third quarter of 2011 to 19.9% (YoY) in the fourth quarter Such good performance has resulted from an increase in inter-island trading, since Java is one of the agricultural industry and production centres and, thus can distribute its products to other regions in Indonesia Similarly, growth in Jakarta throughout 2011 reached a high of 6.8% (YoY), higher than the 2010 growth

of 6.5% (YoY) with strong consumption indicating the strength of the rising middle class in Indonesia.30

However, looking at the Eastern part of Indonesia shows another story Kalimantan, Sulawesi, Nusa Tenggara, Maluku and Papua have had lower economic growth compared to 2010 This lower economic growth was mainly due to labour strike and technical problems faced by many mining companies, especially PT Freeport in Papua Whilst in 2010 economic growth was at 6.0% (YoY) in 2011 growth was at 5.5.% (YoY) Despite this, many infrastructure projects are attracting investment such as the Ngurah Rai airport and the Sanggaran- Nusa Tenggara toll road, both in Bali Construction has also began on the Tayan Bridge which connected West Kalimantan to Central Kalimantan This particular project had required investment of approximately Rp 575 billion.31

Varied Levels of Investment in the Regions

The Investment Coordinating Board (BKMP) has noted that the majority of both domestic and foreign investments have not been equally distributed to all regions in Indonesia, and today most investments are still concentrated in the Java island This has implications for regional connectivity since there is a well-known problem that the outer regions feel that they are caught

in an unfair exchange, since many of their exports go to prop up the development of the Java Island, but receive less back in terms of investments.32

The Indonesia World Development Report of 2009, illustrated that during the 1970s-1980s some provinces were consistently wealthy (Jakarta, East Kalimantan and Riau) and other provinces were consistently non poor (North Sumatra, Central Kalimantan, West and East Java, Bali and

30 Office of Chief Economist, Mandiri Bank, Indonesia Update, February 2012 p17-19

31 Office of Chief Economist, Mandiri Bank, Indonesia Update, February 2012 p21

32 BKPM website: Regional Champions 2011, BKPM website

West Sumatra) and others were consistently very poor (Nusa Tengarra, South East Sulawesi and Maluku).33 However, after the 1980s, export oriented provinces such as Java and Bali grew significantly faster because of export oriented manufacturing with the determining factor being connectivity to global economy The national media has noted that budget allocations to eastern Indonesia are lacking and stand as a barrier to economic growth and increased livelihoods.34

Currently, the Java Island reaches 62% (equal to approximately USD 12.3 billion) of the total foreign direct investment and 49% of the total domestic investment In reaction to this, the BKPM hope to establish the seven ‘Regional Champions’ in 2012: Nanggroe Aceh Darussalam, West Sumatra, Central Java, West Kalimantan, North Sulawesi, Central Sulawesi and South Sulawesi This initiative hopes to push for more domestic and foreign investment to Indonesia’s regions by rewarding the regions who have attracted investment and provided a good service for its investors.35

The MP3EI sets out the estimations for investments across the six economic corridors Most of the domestic and foreign investments are also distributed in the Java economic corridor which amounts to a total of IDR 148 trillion, equal to 59% of the total investment Finance split up for other corridors is as follows in Figure 8

Figure 8 - Indications of Investment in 6 Economic Corridors

34 Jakarta Post, “Nusa Tenggara Provinces Need More Investment”, 26th October 2011

35 BKPM website: Regional Champions 2011, BKPM website

7 Human Resource Development

The MP3EI economic development plan envisions

an expansion in economic activity and a shift

towards higher value added production through

improved technological and skilled labour inputs

The desired expansion of existing industries and

adoption of new processes, however, will require

considerable expansion and adjustments to the

labour supply If the ambitious growth targets are to

be realised, the planned output increases for each

economic activity that shall contribute to these

increased growth rates will have to be met This will

definitely require right human resource mobilisation

At present, Indonesia’s education system is not

producing enough skilled workers to reach the target

levels of development Moreover, calculations of the

output of each economic activity are still lacking as

well as the occupation structure of each of them

This lack of information may cause a delay in

making the provisions required for educating the

workforce

Indonesian training centres are also mismatched

with the planned corridor development.36 Socialising

the concept of MP3EI with the training institutions

is still an issue There are still many provincial

governments that are still not aware of the placement

of the training institutions Moreover, there is also a

lack of political will and commitment among the

provincial governments from each corridor in

coherently aligning their structures and plans

according to the MP3EI What’s more, overall human resource infrastructure is lacking as people from the field of training and education are not yet ready for the implementation of the MP3EI Weak harmonisation and integration of programmes between institutions is also a serious case.37According to the speaker from Ministry of Manpower and Transmigration at the National Seminar in March 2012, the short term and long term plan for every sector must be in place to support the MP3EI in terms of human resource development Accurate and up to date

36

Taken from the presentation of Abdul Wahab Bangkona (Dirjen Training and Productivity Development; Ministry

of Manpower and Transmigration) on Jakarta Seminar, March 14, 2012

37 Taken from the presentation of Abdul Wahab Bangkona (Dirjen Training and Productivity Development; Ministry

of Manpower and Transmigration) on Jakarta Seminar, March 14, 2012

Verbatim Quotes from the Polling Center

in response to the question on Human Resource Development as a barrier to implementing the MP3EI

“ Another obstacle is the capacity of the human resources which are not yet ready

to face the developmental challenges facing Indonesia in the future”

Government, Jakarta Seminar

“ The most important barriers are the need to improve the quality of infrastructure and of human resources

We have to be brave enough to provide courses or educate our human resources,

at least they should participate activities such as internships or educational training in relation to increasing their knowledge so that when investments enter, they are not only workers, but they can also be individuals that we can form partnerships with ”

Government, Kalimantan Seminar

“…The main issue for me is the human

resources, as the level of capacity of human resources is the largest factor affecting the progress of a region If the mindset of the community does not change, then it will be difficult to advance the region.….”

Civil Society, Lombok Seminar

information as well as training centres aligned with the specialisation of each economic corridor are necessary

The Ministry of Education and Culture hopes to increase the number of engineering students The number of engineering students in Indonesia is comparatively low compared to BRIC countries, South Korea, Singapore and Thailand.38 As such, increasing the number of polytechnics, academies, and universities as well as improving the quality of training in these institutions are needed if the Indonesian government wants to increase the number of engineering students five-fold by 2025 to keep abreast with an accelerated economic development

Upon transformation of an infrastructure corridor to an economic corridor, determining and addressing potential skill mismatches is the key in generating job creation, higher economic productivity, competitiveness, and high growth in Indonesia Through the MP3EI, the present pool of human resources is anticipated to meet the needs of all sectors in relation to the main economic activities of each Corridor In making an effective strategy on manpower planning, policy makers must therefore understand first the development needs of the MP3EI and align these needs according to the academic and vocational training programs, by tailor-fitting the academic programs to the economic potential for each Corridor Such vocational education programmes should produce skilled graduates that will support the industries for regional comparative advantage

The MP3EI does not contain details of the manpower planning requirements for its implementation As such, supply side analysis is required to detect skill gaps that exist based on the outlined economic activity in each centre of growth in each corridor.39 Moreover, quality labour market information must be in place so that people can decide on informed choices about their careers Many jobs are present in the informal economy or no-contract jobs, which explains the need to strengthen social dialogue to improve access to decent work Entrepreneurship must also be promoted so that University graduates can become job-creators rather than job-seekers40

Mapping out the manpower planning needs for Indonesia will be a tremendous challenging exercise as it requires detailed research in all sectors of economic expansion, strong time series data, and substantial methodological capacity In addition, projections of labour and education requirements based from project outputs are subject to various possibilities in production methods and labour market demand This is likely to be a complicated process that cannot be carried out alone by the Ministry of National Education (MONE) as it requires the cooperation of other entities such as Bappenas and the Ministry of Finance to develop more accurate forecasts Moreover, specific forecasts for the conditions of each one of the provinces of economic corridors are also needed

38 Taken from the presentation of Abdul Wahab Bangkona (Dirjen Training and Productivity Development; Ministry

of Manpower and Transmigration) on Jakarta Seminar, March 14, 2012

39 Taken from the presentation of Emma Allen (International Labour Organisation Indonesia) on Jakarta Seminar, March 14, 2012

40 H.E Dr Susilo Bambang Yudhoyono, Intenrational Labour Conference on June 14,2011

Source: MP3EI p49

8 Financing and Attracting Private Sector Investment

As shown, the MP3EI states that only 10 percent of the required investment needed for the implementation of the six economic corridors will come from the government state budget The rest is expected to come from state owned enterprises, a mix of sources and

at 51 percent, the majority is hoped to the raised by investment from

the private sector

A key theme raised during this project was the lack of incentives for the private sector to invest Others have also argued that the private sector have been relatively uninformed of the formation of the MP3EI, and thus are not aware of the opportunities for investing in the policy

Indeed, it must be considered that all barriers discussed thus far in

this paper all contribute to an overall barrier which does not actively encourage the private sector to invest in the

MP3EI: lack of socialisation of the master plan,

the need for regulatory and institutional reform at

the national and regional level, lack of sound

infrastructure and the need to improve human

resources Lipseya and Sjoholm agree, arguing

that a ‘relatively poor business environment,

inefficient government institutions, low levels of

education and poor infrastructure all seem to be

important explanations for the low inflows of

FDI to Indonesia’.41

The table below demonstrates the seriousness

need for institutional reform in corruption and

bureaucracy as the two major barriers which can

make private sector investment unattractive

Yet, in 2011 and 2012 Indonesia has seen its

credit rating upgraded In 2011, Standard and

Poor’s raised Indonesia’s bonds to BB+

Moody’s followed, upgrading Indonesia to Baa3,

41 Robert E Lipseya & Fredrik Sjöholm, Foreign direct investment and growth in East Asia: lessons for Indonesia,

Bulletin of Indonesian Economic Studies, Volume 47, Issue 1, 2011

Verbatim Quotes from the Polling Center in response to the question on the Biggest Implementation Barriers for the MP3EI

“ The biggest barriers that every investor

talks about are the lack of regulations and standardised issues…”

“ The obstacle is in the regulation, either

central or local regulations Some local regulations are overlapping, they should be synergized and government should be bold in taking actions toward local regulations that need to be adapted Definitely this will have both positive and negative impacts ”

“ Foremost is the implementation in the operational level on the local involvement in the process, meaning it is not only the state that enters there, but we must address how to strengthen the local involvement so the community can feel the benefits ”

All views from members of the Private Sector, Kalimantan Seminar

Source: MP3EI

from Ba1.42 Similarly, Fitch ratings have upped their grading to BBB- from BB+, putting the

country into investment grade after 14 years Indonesia remains strong at 46th place in the World Economic Forum Global Competitiveness Report 2011-2012.43 Furthermore, the government recently announced that there has been an increase of almost Rp 1,000 trillion ($109 billion) committed to the MP3EI, with the energy and transportation sectors attracting the most interest With the revised pledge figure, by the end of February 2012 investors had committed to investing a total of Rp 4,925 trillion for the MP3EI.44

This seems to paint the picture that although large improvements are being made, such milestones are fairly recent, and thus it is vital to ensure the private sector of such improvements and commit to the continuation of improving the investment climate

The Transportation Ministry has requested Rp 4.17 trillion in additional funds to complete its projects, in particular developing new river and sea routes that will aid the movement of goods and people Such links will be vital for lowering business costs and accelerating economic growth Besides helping develop transportation in less-developed eastern Indonesia, the fund is also to be spent on supporting the development of the MP3EI economic corridors

Figure 9 - Factors for Doing Business in Indonesia

Source: Global Competitiveness Report, 2010-2011, World Economic Forum

42 Mamta Badkar, “Indonesia Just Got Its Investment-Grade Credit Rating Back”, Business Insider, 19 th

January

2012

43 World Economic Forum, “The Global Competitiveness Report 2011-2012”

44 Editorial ‘As MP3EI Blossoms, Resolve Is Needed’, March 13, 2012, Jakarta Globe

Verbatim Quotes from the Polling Center in response to the question on the Roles of Government and Private Sector in the Implementation of the MP3EI

“ Bappenas and Coordinating Minister of

Economic Affairs conducts the planning process, APBN will be involved there, so the DPR will also enter at the implementation level, eventually, the debate on the APBN will still take place at the DPR, how far will they be committed? MP3EI is huge, the role

of APBN would probably be around 8%, from the private sector 92% ”

Government Official, Kalimantan Seminar

“ Definitely the most important actor should be the local government, then also the different associations who represent some communities, say KADIN, APINDO, community groups, and private sector associations, and academics can also provide a neutral opinion…”

Private Sector, Kalimantan Seminar

“ All parties are very important The importance of the government is from the aspect of policy making, budgeting and spatial planning Investment from the private sector is also essential as they are directly involved in the project ”

Government Official, Jakarta

“ The most important role is played by the government, as regulations stem from them The government formulates the rules ”

Government Official, Jakarta

“ The government, because in a developing country, the government always takes a leading position ”

Private Sector, Jakarta

Furthermore, official international partnerships

have been made For example, Indonesia and

China recently agreed on the establishment of a

working committee reflecting China's support of

the MP3EI It is hoped that China will take part in

the implementation of the MP3EI, which has been

apparently welcomed by Wen, Antara news

agency reported.45

Opinions collected throughout this project found a

marked contrast in the perceived roles of

implementation and ownership of the MP3EI

Many government officials speaking about the

MP3EI noted the importance of the private sector

to contribute a large amount of money to finance

projects Many government spokespersons thus

argued that the private sector was the main driving

force for the implementation of the MP3EI, and

that the government role should limited to

overseeing the implementation and to provide a

conducive investment climate

However, interviews with members of the private

sector show a miscommunication in the intended

roles of stakeholders for the implementation of the

policy Indeed, the verbatim quotes shown here

demonstrate that some members of the private

sector view the government as the main driving

force for the MP3EI’s implementation

Therefore, there is a risk that both groups of

stakeholders will expect each other to be the

impetus for the MP3EI and as such no group will

take full ownership and responsibility for the

MP3EI to meet its targets and goals

Fiscal Decentralisation

The increase in fiscal autonomy at the regional

level and implicit decrease in fiscal responsibility

for the regions at the centre increases the variation

in regional fiscal spending according to regional capacity rather than need In the context of decentralisation, rather than the central government spending national funds equally across the regions or subsidising those in greater need, it becomes incumbent on regional authorities to

45 Jakarta Post, “China Agrees to Support Indonesia’s Economic Master Plan”, 23 rd June 2011

raise funds to bankroll their own fiscal spending Government spending in each region is therefore determined by fiscal capacity at the regional level which in turn depends on regional rather than national levels of economic activity This sees a reduction in inter-regional redistribution of public finances resulting in a failure to counteract the emerging inter-regional

inequalities that result from variable economic activity at the regional level

Inter-regional variation in economic activity translates to variation in regional fiscal capacity

The existence of variation in economic activity across regions translates (in the absence of centrally enacted fiscal transfers) to variable fiscal capacity at the regional level which can increase inequality where it is sensitive to levels of fiscal spending Uneven fiscal spending can entrench interpersonal income inequalities, for example, when low income groups are unable to increase their income levels through improved education and health outcomes and when they are

vulnerable to income shocks in the absence of social protection mechanisms

Regions receive variable fiscal funds when the capacity of regional authorities to raise funds, primarily from the tax base, is variable This might vary according to regional comparative advantage such as the extent of urbanisation, the size of the market, natural resource concentration, infrastructure, education levels of the citizenry and so on and according to the economic conditions set by the regional authority in terms of, for example, investment regulation When decentralisation has been initiated as a result of political concerns to address an uneven distribution of political sensibilities across the country, perhaps derived from concentrations of different ethnic groups in certain areas, the extent of policy variation of this kind across regions is likely For example, where decentralisation has been enacted to address the economic grievances of minority groups who feel they have been negatively impacted by market functioning, a regional authority might represent their interests by disabling market forces This could reduce interregional inequality through redistributive state intervention but might increase interregional inequality in the long term by hindering the region’s economic growth

9 Environmental Sustainability

Climate change mitigation and the preservation of the environment are two major concerns that arise when looking at this ambitious policy for growth and economic development Alongside the MP3EI is Indonesia’s commitment to reduce carbon emissions At the G20 Pittsburgh Summit in 2009, President Susilo Bambang Yudhoyono committed to reducing green house gas emissions by 26 percent by 2020 combined with its target of maintaining a 7% per year growth level However, as yet the MP3EI is not aligned with the target to reduce carbon emissions The MP3EI policy itself is lacking in a concrete plan as how to increase economic growth whilst being environmentally sustainable

Under the REDD+ initiative, Indonesia will expand the scope of its activities from avoided deforestation and degradation, to include forest restoration, rehabilitation, sustainable management and/or reforestation Indonesia could earn up to USD $1 billion annually by selling carbon credits to industrialised countries The World Bank has noted Indonesia’s progress towards meeting its target of reducing greenhouse gases, stating that Indonesia is setting an

example for other countries to follow Yet, the REDD+ initiative, as one of the most significant ways to mitigate climate change has not yet been integrated into the MP3EI policy The REDD+ initiative is only mentioned very briefly in the MP3EI itself, and does not specify how to implement the initiative within the MP3EI

Clash with Environmental Sustainability: Kalimantan

Issues surrounding Kalimantan’s environment in particular were prominent throughout this project In a meeting with the head of BAPPEDA, East Kalimantan in September 2011, it was discussed that the BAPPEDA staff were concerned that the MP3EI promoted only the extraction

of non-renewable resources for the Kalimantan Corridor The members of BAPPEDA feared that

if the region does not move towards value-added goods there will be a risk of economic shock when resources run out During the first seminar in Balikpapan, East Kalimantan, the theme of environmental sustainability was raised as a particular concern for the implementation of the

Economic Corridor Arie Rompas, Executive Director of WALHI, Central Kalimantan put forth

his opinion that a “development model that still relies on natural resource extraction ignores environmental sustainability and causes ecological damage in Kalimantan.”

Climate Change Mitigation and the MP3EI Seminar

The third seminar in this project looked specifically at aligning climate change mitigation with the MP3EI On Wednesday 8th and Thursday 9th February 2012, the third seminar was held in Jakarta to discuss how to align environmental sustainability with the MP3EI A total of 85 people attended this two day event, including participants from across Indonesia’s regions as well as one special international guest, Dr Vlasios Voudouris from the London Metropolitan University Key findings from this Seminar are as follows:

Ir Sulistyowati, MM (Assistant Deputy Minister for Climate Change Mitigation and Atmospheric Function Preservation, Ministry of Environment of Republic of Indonesia) noted that so far, Indonesia has made progress to support climate change mitigation for example the President’s target to reduce carbon emissions by 26% To support the implementation of this plan, the government has conducted a preliminary inventory of all economic daily activities from the lower level of government institutions such as the district level Among various sources of carbon emission, the forest and peat land accounts for about 60% of the emission in Indonesia which means that the emission from this sector is substantially high

Dr Endah Murniningtyas, M.Sc., Deputy Natural Resource and Environment, BAPPENAS noted that the Greenhouse Gas National Action Plan consists of core activities, integrated among sectors, to reduce emissions and support activities to strengthen policy framework The six economic corridors in the MP3EI Policy should be implemented across 33 provinces and it is better for each provincial government to prepare their own formulation of their GHG action plan

To smooth the implementation of the plan, each ministry and government institutions should have consultations with their branch offices in the regions in order to arrange and formulate the regional action plan (RAD GRK) Furthermore, the plan could be cemented by implementing it

as a Governor decree For all 33 provinces, RAD GRK is a communication tool among regions and also between regions and the central government The government should realise that socialisation is key for the long term development of the plans

Dr Ir Kirsfianti L Ginoga, M.Sc., Head of Research and Development Center for Climate Change and Policy, Ministry of Forestry stated that REDD+ and other methods to mitigate against climate change need to be integrated with the MP3EI Reducing emissions from forestry

is so important in Indonesia because approximately 80% of the country’s total emissions come from this sector REDD+ should also be prioritised in certain parts of Indonesia such as the primary forest in Papua, Sulawesi and Kalimantan The strategy of MP3EI and GHG NAP must

be translated into land based mitigation in sectoral and at the regional level and programmes and activities in each sector must be clear and operational for every location

Nyoman Iswarayoga, Climate and Energy Program Director, WWF Indonesia argued that the MP3EI has neglected environmental sustainability Therefore, considering that there are still forested areas in Indonesia, such as Kalimantan, it would be a good step if we could create a green zone for conservation It then leads to an initiative of implementing Green MP3EI where there should be better management practices in agriculture and plantations, improving spatial urban planning where it can be used as a reference in the development and the government should strictly implement the approved spatial planning, Green Business Initiative, and Green Infrastructure Development

Dr Daniel Murdiyarso, a Senior Scientist from CIFOR argued that in the Kalimantan Corridor, according to an analysis on Indonesia’s forest moratorium, implementing REDD+ will not be enough to meet the targets to reduce greenhouse gases There should be multi-sector efforts to prepare a strong regulatory framework and law enforcement in order to integrate REDD+ into the MP3EI If we look at the Kalimantan Economic Corridor, the region’s theme is dedicated for

a centre for the Production and Processing of Mining Goods and National Energy The region has various challenges in reducing its carbon emissions because the capacity for storing the carbon is fairly small since reforestation is not the solution for reducing emissions The ever expanding oil palm plantations in Kalimantan are a huge challenge

Prof Dr Daddy Ruhiyat, Executive Director of Climate Change Board, East Kalimantan stated

that the East Kalimantan region has been identified as region with the highest carbon emissions The forestry and palm oil sectors are the biggest contributors to these emissions Since the MP3EI promotes the forestry and palm oil sectors as well as other sectors using non renewable resources such as coal, the MP3EI in the Kalimantan Corridor does not promote environmental sustainability It is not clear how the MP3EI intends to work towards lowering environmental sustainability in the Corridor

Similarly, Benja Victor Mambai from WWF, Papua, spoke of the problem in connectivity in

Papua due to underdeveloped infrastructure In the future through MP3EI, it is hoped that there will be an increased number of infrastructure projects to fulfill this need In order to do so, the local government has prepared to improve spatial urban planning towards a goal of making Papua more sustainable in their economic development

Ir A A Bagus Sudharsana, Dipl PLG, Head of the Denpasar Environmental Agency, Bali, stated that actions have also been integrated into the Spatial Plan, however this has yet to be