MP3EI 2011-2025 The Master Plan for Accelerating and Expanding Indonesia’s Economic Development An Overview of Concept and Implementation Issues Dr. Astia Dendi Component Team Leader Policy Advice & Networking Decentralisation as Contribution to Good Governance Program (GIZ-DeCGG)
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MP3EI 2011-2025The Master Plan for Accelerating and Expanding
Indonesia’s Economic Development
An Overview of Concept and Implementation Issues
Dr. Astia DendiComponent Team Leader Policy Advice & NetworkingDecentralisation as Contribution to Good Governance Program (GIZ-DeCGG)
Structure of Presentation
• Purpose of presentation• Indonesian 2025’s Vision• What’s & What’s not MP3EI? • Objectives and Strategic Frameworks of
MP3EI:• Issues and Constraints in MP3EI Implementation
• Concluding Remarks
Purpose of Presentation
• Introduce basic concept and strategic elements
of MP3EI to the team members GIZ
Decentralisation as Contribution to Good
Governance Program (DeCGG);•Discuss some issues and constraints of MP3EI
implementation•Food for thought: Bureaucracy Reform &
MP3EI
Background
Geopolitical and
geoeconomic position
of Indonesia
Natural resources
endowment
Demography bonus
INDONESIA
Indonesia 2025’s Vision
“Propelling Indonesia into a developed nation, to be one of the ten world largest economies by 2025, and to be one of the six world largest economies by 2050 through high, inclusive, and sustainable economic growth.”
Source: Coordinating Ministry of Economic Affairs: MP3EI 2011-2025
The 2025’s Vision focuses on three main goals:
• Increase added value, expand value chain and efficiency of industries:
• Integrate domestic market to enhance competitiveness and strengthen the national economy;
• Strengthen the national innovation system towards an innovation-driven economy.
What’s and What’s not MP3EI?
• MP3EI is a roadmap to transform Indonesia’s economy, to accelerate economic growth and to improve competitiveness;
• MP3EI is a working document to implement the Long Term Development Plan 2005 -2025:
• MP3EI provides direction of development for specific economic activities (8 programs & 22 economic activities), requirement for the investment and the improvement of the regulatory framework;
• The MP3EI is not a substitute for the National Mid Term Development Plan (RPJMN) and not a substitute for the ongoing national and regional development programs;
Objectives of MP3I
Objective Indicators: Income per capita will shift from USD 3,000 to around USD
15,000 with GDP of around USD 4-5 trillion in 2025.Real economic growth of 7 - 9 percent per yearRate of inflation is 3% by 2025Improved equalityEtc.
“Propelling Indonesia into a developed nation, to be one of the ten world largest economies by 2025, and to be one of the six world largest economies by 2050 through high, inclusive, and sustainable economic growth.”
MP3EI Estimated Investments
Strategic Framework of MP3EI
Source: Coordinating Ministry of Economic Affairs: MP3EI 2011-2025
Programs and Main Activities of MP3EI
Source: Coordinating Ministry of Economic Affairs: MP3EI 2011-2025
Institutional Setup of MP3EI
Source: Presidential Decree No. 32 year 2011 on MP3EI 2011-2025
Director : President of Republic Indonesia
Vice of Director : Vice President of Republic Indonesia
Executive Director (Ketua Harian)
: Coordinating Economic Minister
Deputy 1 : Minister of National Development Planning Agency
Deputy 2 : Coordinator for National Economic Committee
Members : • 22 Ministers• Cabinet Secretary• Head of Indonesia Investment Coordinating Board• Head of National Land Agency• Head of National Innovation Committee• Chairman of Chamber of Commerce
The Six Economic Corridors
Source: Coordinating Ministry of Economic Affairs: MP3EI 2011-2025
Annual Growth Target for The Six Corridors in Year 2025
% GDP Nominal Growth (2010-2025)
Source: Coordinating Ministry of Economic Affairs: MP3EI 2011-2025
The Framework of Indonesia’s Connectivity
Source: MP3EI 2011-2025, Coordinating Ministry of Economic Affairs
The objectives of the national connectivity strengthening
1. Connecting the centers of major economic growth based on the principles of integration, through “inter-modal supply chain systems”.
2. Expanding economic growth through accessibility improvement from the centers of growth to the hinterland.
3. Distributing the benefits of economic development by improving the quality of connectivity to the less developed areas, isolated areas, and border areas in order to achieve equitable economic development.
Human Resource Development
• Academic Education Program developing higher formal ➜schools (university academic & polytechnic) and university research centers nationally:
• Vocational Education Program the development of ➜community colleges in every capital city, and the development of education vocational schools.
• The development of job trainings and certification bodies:• The enhancement of technological competence and skills:• The development of a national sustainable innovation
system (see next slide):
Human Resource Development: The Proposed Innovation Initiatives
Source: Coordinating Ministry of Economic Affairs: MP3EI 2011-2025
Challenging Issues and Constraints
Source: Author’s compilation
Challenging Issues and Constraints
Source: BPS
Problematic Factors for Doing Business In Indonesia
Source: World Economic Forum: The Global Competitiveness Report 2013-2014
Time and Cost for starting Business in Indonesia**
Indonesia’s Doing Business Rank*
**Source: World Bank, Doing business in Indonesia, 2012
DB 2012 (of 183 economies)
DB 2014 (of 189 economies)
Ease of Doing Business:
129 120
Starting a business 155 175
Dealing with construction permits
71 88
Getting electricity 161 121
Registering property 99 101
Getting credit 126 86
Protecting investor 46 52
Paying taxes 131 137
Trading across borders
47 54
Enforcing contracts 156 147
Resolving insolvency 146 144
*Source: Compiled from World Bank: Doing Business Reports
• Indonesia has made significant progress in improving national economy and
global competitiveness; but facing some problematic issues.
• MP3EI calls for a whole government approach
• Quality of governance matters: Build on integrity, harmonize and simplify
regulations, promote vertical and horizontal coordination & collaboration, and
evidence-based policy making;
• What are appropriate incentives for boosting private sector
involvement/investment?
• Land acquisition: State Law VS Adat Laws (e.g. Law 22/ 2012 and Presidential
Regulation 71/ 2012)?
• Need for Local stakeholders ownership: stakeholders fora for MP3EI?
• Shift from Business as Usual to Innovation-Driven: A Great challenge for
Bureaucracy Reform!
References:
• A.T Kearney (2013), Foreign Direct Investment Confidence Index. Back to Business: Optimism Amid Uncertainty.
• Bappenas (2011), Sustaining Partnership: National Connectivity 2011 Special Edition.
• Coordinating Ministry For Economic Affairs (2011), Master plan for Acceleration and Expansion of Indonesia Economic Development 2011-2025.
• Strategic Asia (2012). Implementing Indonesia’s Economic Master Plan (MP3EI): Challenges, Limitations and Corridor Specific Differences, can be accessed at: http://www.strategic-asia.com/pdf/Implementing%20the%20MP3EI%20Paper.pdf
• World Bank, Doing Business in Indonesia 2012.• “Land restriction put brakes on MP3EI Growth”, Jakarta Post, Tuesday, 11 June 2013, can
be accessed at: http://www.thejakartapost.com/news/2013/06/11/land-restrictions-put-brakes-mp3ei-growth.html
• “MP3EI infrastructure projects flounder as govt fails to act”, Jakarta Post, Friday, 31 August 2012, can be accessed at: http://www.thejakartapost.com/news/2012/08/31/mp3ei-infrastructure-projects-flounder-govt-fails-act.html
• Presidential Decree No. 32 year 2011 on MP3EI 2011-2025