The Issue of Connectivity in Indonesia. Sustaining Partnership. Media for Information on Public Private partnership. Special Edition December 2011

The Connectivity OfSix Economic Corridors

33 PPP Projects to Support MP3EI

How And What Is MP3EI?

The Action Plan to StrengthenNational Connectivity

National Connectivity 2011 Special Edition

SUSTAINING PARTNERSHIP - National Connectivity 2011 Special Edition2

EDITORIAL

How will Indonesia be in 2025?

In 2025, Indonesia’s income per capita is targeted to reach around USD 15,000 with a GrossDomestic Product (GDP) of arround USD 4 to 5 trillion. Indonesia will receive a new titleas a high earning country. As an illustration, in 2010, Indonesia’s income per capita was USD3,000 and it had a GDP of USD 700 billion.

This question will surely arise: how can we achieve that target? Can all stakeholders in thecountry synergize to build Indonesia? The answer is: they must be capable and must be ableto do it.

Now, there is the Master Plan for the Acceleration and Expansion of Indonesia’s EconomicDevelopment (MP3EI). This is a working document that complements the other existingdocuments such as the Long Term and Medium Term Development Plan for both the nationaland regional level.

MP3EI is intended to encourage rapid, balanced, equitable and sustainable economic growth.Through those acceleration measures, Indonesia will be able to place itself in the ten majornations of the world by 2025 and six major nations by 2050.

To achieve Indonesia’s Vision by 2025, three basic strategies are formulated, namely thedevelopment of economic potential through economic corridors; strengthening nationalconnectivity; and strengthening human resource and National Science and Technologycapabilities. With respect to this matter, national connectivity becomes a highly relevant issueto discuss in the Sustaining PARTNERSHIP magazine.

Magazine discusses about how and what MP3EI is; the link between MP3EI with otherworking documents; and an action plan to improve national. This edition is also complementedby the opinion of experts and observers of this subject and a list of government programs withthe PPP scheme that supports the massive MP3EI program.

The issue of inter corridor connectivity is strongly associated with the availability of infrastructuresthat enable inter island and inter territory connectivity to become faster and cheaper. Therefore,ports with good shipping and loading and unloading management is a necessity. Connectivityshould also be supported by an effective means of land transportation such as logistic trainsand the existence of a smooth distribution routes.

By highlighting the issue of national connectivity, hopefully we could provide an overviewof the various investment opportunities in infrastructure in accordance with the government’spriorities and major programs. Because without the participation of the private sector, it willbe impossible to properly develop various infrastructures in Indonesia.

Please enjoy reading the magazine.

Editors

The Issue of Connectivity in Indonesia

Infrastructure Reform SectorDevelopment Program (IRSDP)BAPPENASJl. Tanjung No.47 Jakarta 10310websites: www.irsdp.orgTel. (62-21) 3925392Fax. (62-21) 3925390

ADVISORDeputy Minister for InfrastructureAffairs, Bappenas

DIRECTORDirector for Public PrivatePartnership Development, Bappenas

CHIEF EDITORJusuf Arbi

BOARD OF EDITORSDelthy Sugriady Simatupang,Gunsairi,Rachmat Mardiana,Novie Andriani,Mohammad Taufiq Rinaldi,Ade Hendraputra

MANAGING EDITORB. Guntarto

REPORTER/RESEARCHERSandra Kaunang,Agus Supriyadi Hidayat

PHOTOGRAPHERArief Bakri

GRAPHIC DESIGNERIndrie Soeharyo

TRANSLATOR FROMINDONESIAN VERSIONSetiana

National Connectivity 2011 Special Edition - SUSTAINING PARTNERSHIP 3

CONTENT

MP3EI Background: 4

9

13

18

MP3EI and RPJPN - RPJMN:

Economic Corridor:

Action Plan:

25

Expert Opinion:

PPP Project:

HOW AND WHAT IS MP3EI?

THE CONNECTION BETWEENMP3EI, RPJP AND RPJM

THE CONNECTIVITY OFSIX ECONOMIC CORRIDORS

THE ACTION PLAN TO STRENGTHENNATIONAL CONNECTIVITY

OPINION ABOUT CONNECTIVITY IN MP3EIPRIORITIZATION OF CONSTRUCTION

33 PPP PROJECTS TO SUPPORT MP3EI

22

Various efforts that were made to encourage economic growth inIndonesia faced numerous challenges, in particular limitedprovision of infrastructures that support economic activities. Onthe other hand, infrastructure availability is urgently needed whilethe government’s funding ability for infrastructure developmentis very limited.

Therefore, the participation of the private sector is crucial andmust be realized to accelerate the realization of Indonesia’sdevelopment potentials. This could be achieved throughinfrastructure provision which is jointly conducted by thegovernment and private sector.

DEVELOPMENT POTENTIAL ANDCHALLENGES IN INDONESIA

As the largest archipelagic nation in the world, Indonesia has arange of potentials shown by the characteristics of its geography,demography, economy, socio-culture and natural resources. Froma geographic point of view, Indonesia is located in a strategicplace and has direct access to the largest market in the world sinceit is passed by the Sea Lane of Communication (SLoC) which isMalacca Strait that ranks first in the global container shippingline.

From the demography perspective, Indonesia also has a“demographic bonus” until 2030. This means that there is anincrease in the number of productive aged population. Thedemography bonus shows that Indonesia’s economic potential isalso supported by the potential of human resources productivityin the future.

Another potential is rich natural resources. As we know, Indonesiais known as a country rich with natural resources, both renewable(agricultural products) and non renewable (mining and minerals).In fact, for some key commodities, Indonesia is one of the world’slargest producers and exporters.

Indonesia’s various superiorities in natural resources must bemaximally utilized with the precautionary principle, especiallyfor matters related to the sustainability of natural resources andenvironmental damage that may occur.

On the other hand, Indonesia is also facing challenges indevelopment. Natural resources owned by Indonesia are notevenly distributed in all parts of Indonesia. The distribution ofnatural resources, especially oil and gas, as well as trade andindustry growth centers are only concentrated in some areas. Thisconcentration causes disparities between regions and differencesof social welfare between regions.

The Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development(MP3EI) was formulated based on various information and considerations that covers avariety of potentials possessed by Indonesia, particularly natural resources potential. Theabundant amount of natural resources owned by Indonesia is an invaluable potential thatcan be developed to encourage economic growth in Indonesia.

MP3EI BACKGROUND


We must change our dependence on the primarysector as the driving force of the economy. However,it is undeniable that the abundant amount of naturalresources is an economic potential. Natural resourcesmanagement must be supported by good managementand adequate infrastructures so it could optimallyencourage economic growth.

Another challenge faced by Indonesia is low interregion connectivity which is indicated by the lowavailability of infrastructures that encourage economicactivities. Infrastructure availability in some regionsin Indonesia, especially in eastern Indonesia is stillinadequate.

Looking ahead, Indonesia’s infrastructure developmentshould be focused to improve inter region connectivity.This aims to reduce transportation and logistics coststo encourage competitiveness and accelerate thedistribution of products.

Aside from economic potential and existing challenges,Indonesia’s image in the international level isimproving. Global trust to Indonesia’s condition hasincreased in accordance with the improvement ofIndonesia’s rank in terms of its condition. This rankis determined by various international institutions.

In light with the above, transformation is necessaryto shift the consumption based economy into ainvestment based economy. Such transformation mustbe prepared from now with the hope that by 2030,Indonesia will be successful and has completed thetransformation.

To support economic transformation, a concept onthe acceleration and expansion of Indonesia’s economicdevelopment which is the concept of the developmentof Indonesia Economic Corridors is currently beingdeveloped.

This concept uses a regional approach to acceleratethe economy by addressing issues in regionaldevelopment, namely lack of infrastructure and energysupply, inefficient logistic management, disintegrateddomestic market (not united) and limited connectivityto the global market.

HOW AND WHAT IS MP3EI?

MP3EI is a roadmap that is formulated as an attemptto transform the economy to encourage economicactivities as well as to accelerate economic growth toimprove competitiveness.

Such economic transformation efforts must be doneby considering all of the potentials and challengesfaced by Indonesia. In addition, MP3EI also acts asa starting point in developing the mutual commitmentof the Government and business sector to carry outv a r i ou s co ncr e t e de ve l op m en t m e as u re s .

National development is not merely an aggregationor a combination of local/regional development oreven a joint development between sectors. Nationaldevelopment is the result of synergy between variousforms of linkages, such as spatial linkages or regionallinkages, sectoral linkages and institutional linkages.National development is conducted through a bettersynergy between the central government, regionalgovernment, State Owned Enterprises (BUMN), LocalOwned Enterprises (BUMD) and the private sector.

The private sector will play a major and importantrole in the acceleration and expansion of economicdevelopment particularly in terms of increasinginvestment and job creation. In contrast, thegovernment will function as the regulator, facilitatorand catalyst.

Facilitation and catalysis will be provided by thegovernment through the provision of infrastructuresand fiscal and non fiscal incentives. In terms ofregulation, the government will perform deregulation(debottlenecking) of certain regulations that impedethe implementation of investments.

Specifically, within Indonesia Economic Corridor,the role of the central government will only be limitedto the regulation and allocation of central investment.

MP3EI is also a starting point to encourage

Indonesia to become a developed country in

the future. MP3EI’s development concept was

made with an approach based on the spirit

of “Not Business As Usual”.


Meanwhile, the role of the local government, especially thoselocated in Indonesia’s economic corridor, will play as thedirect user of the determined corridor. In addition, regionswill also play a role in determining regulations and investmentallocation in the region.

However, we must realize that government budget, eithercentral or local, is limited. Therefore, the spirit of not businessas usual should be reflected as an important element indevelopment, especially in infrastructure provision.

It is very difficult to fulfil l the needs for adequateinfrastructures across Indonesia with limited governmentbudget. Hence, several infrastructure provision schemes canbe implemented through joint investment allocation betweenthe government and private sector though Public PrivatePartnership (PPP).

These changes should start from the Government along withits bureaucracy and should be followed by increasedproductivity, innovation, and creativi ty through thedevelopment of science and technology. In addition, the roleof the business sector in economic development must alsobe increased.

To achieve success in development, there are severalrequirements that must be met. Firstly, the role of thegovernment and business sector in development. The businesssector (private, state and local enterprises) plays a major andimportant role in development, especially in increasinginvestments and job creation. Meanwhile, the Governmentis responsible for creating a conducive macro economycondition for investments. Therefore, the commitment ofthe business sector and government becomes crucial to supportthe implementation of policies.

Secondly, reformation of government financial policies.Budget policies must be made by creating a credible andsustainable State Budget (APBN) and it must prioritizeaccelerated growth to create equitable and sustainabledevelopment.

Thirdly, bureaucracy reformation. The Acceleration andExpansion of Indonesia's Economic Development needs to

be supported by an effective bureaucracy which is supportedby strong institutional commitment and the implementationof good governance.

Fourthly, the establishment of inter region connectivity inIndonesia. In this case, the government becomes the motorfor the establishment of inter region connectivity which canbe realized by implementing an integrated system betweennational logistics, national transportation system, regionaldevelopment and communication and information systems.

Fifthly, food, water and energy independence policy. This isan essential prerequisite to support successful developmentin Indonesia.

Sixthly, Social Security and Poverty Alleviation. Thegovernment is responsible for implementing the social securitysystem to protect the public against economic developmentrisks. Hence, the government needs to provide social securityand conduct poverty alleviation efforts sustainably by creatingmany jobs.

Basically, the economic corridor concept uses the regionalapproach to accelerate the economy by resolving variousregional development issues. 6 economic corridors have beenidentified covering most of Indonesia’s area which arespecifically enumerated as follows: East Sumatera – NorthwestJava, Northern Java, Kalimantan, Sulawesi, East Java – Bali– Nusa Tenggara and Maluku Islands and Papua.

Indonesia Economic Corridors basically consists of the mainland access master plan which mainly connects economiccenters and supporting land accesses that connects focussectors to facilities/supporting infrastructures throughoutIndonesia.

Therefore, the basic development of economic corridors inIndonesia will focus on national connectivity (intra and interisland as well as international connectivity). The basis of thedevelopment of Indonesia’s economic corridors is alignedwith the four main concepts, namely road map, the nationallogistics system, the national transportation system andregional development.

In addition to intra and inter island connectivity, economiccorridor development also aims to enhance regional andglobal connectivity. Within the regional and global scope,national connectivity is strengthened by the economic corridorconcept and is expected to connect Indonesia with regionaleconomy centers such as ASEAN and the world (global) asan effort to enhance national competitiveness. It is very

MP3EI is developed based on various basic

principles on successful development that

requires change in the point of view and attitude

of all components of the nation


MP3EI BACKGROUND

Sumatera Corridor:“Center for Production and

Processing of NaturalResources and As

Nation’s Energy Reserves”

Kalimantan Corridor:“Center for Production and

Processing of NationalMining and Energy

Reserves”

Java Corridor:“Driver for NationalIndustry and Service

Provision”Bali – Nusa Tenggara Corridor:

“Gateway for Tourism andNational Food Support”

Sulawesi Corridor:“Center for Production and Processingof National Agricultural, Plantation,

Fishery, Oil & Gas, and Mining”

Papua – Maluku Islands Corridor:“Center for Development ofFood, Fishery, Energy and

National Mining”

important to maximize the benefits of regional and globalconnectivity.

INDONESIA ECONOMIC CORRIDORS

Indonesia Economic Corridors or MP3EI is implemented toaccelerate and expand economic development in Indonesia throughthe development of 8 (eight) main programs that comprise of 22(twenty two) main economic activities located throughoutIndonesia.

The development of those 8 (eight) major programs include: themanufacturing, mining, agr iculture, marine, tour ism,telecommunications and energy industry and the developmentof national strategic zones. The focus of those 8 (eight) mainprograms covers 22 (twenty two) main activities such as: the iron-steel, food, beverages, textiles, transportation equipment, shipping,nickel, copper, bauxite, palm oil, rubber, cocoa, fishery, tourism,telecommunications, coal, and oil and gas industry as well as thedevelopment of Jabodetabek Metropolitan and Sunda Strait.

The main strategy of the implementation of MP3EI is done byintegrating the 3 main elements.

Firstly, the development of a 6 (six) Indonesia Economic Corridors,namely: the corridors of Sumatera, Java, Kalimantan, Sulawesi,Bali – Nusa Tenggara and Papua – Maluku Islands. These 6 (six)economic corridors are developed through the development ofgrowth centers in each corridor by developing industrial clustersand Special Economic Zones (SEZ) that operate based on thekey resources of each economic corridor. The development themeof these six economic corridors has been determined accordingto the potentials possessed by each region and the desireddevelopment goal.

Secondly, strengthening the locally integrated and internationallyconnected national connectivity. The strengthening of nationalconnectivity aims to improve the distribution of goods and servicesand reduce logistics transaction costs.

Within the context of the development of a locally integratedand internationally connected national connectivity, thedevelopment and strengthening of connectivity is done bystrengthening intra and inter connectivity of economic growthcenters and inter corridor (island) connectivity to smoothen thecollection and distribution of raw material, semi finished materialsand final products moving in and out of the corridors (islands).

INDONESIA ECONOMIC CORRIDORS DEVELOPMENT

Source: Master Plan for the Acceleration and Expansion ofIndonesia's Economic Development (MP3EI) 2011-2025, Coordinating Ministry of Economic Affairs


Meanwhile, international connectivity is enhanced by strengtheninginfrastructure networks, communications networks and commoditymovement (goods, services and information) effectively andefficiently as the gateway for inter country trade and tourism.

Thirdly, accelerating capacity building of human resources inIndonesia and developing science and technology to support thedevelopment of major programs in each economic corridor.Considering the “demography bonus” which Indonesia will havein the future, the quality of human resources must be enhanced.

Several policies are implemented to improve the quality of resourcessuch as by improving the quality of education including highereducation, vocational education, and training specifically relatedto the development of major programs; increasing technologicalcompetence and skills; enhancing research development activitiesthrough collaboration between the government, business sectorand higher education institutions and develop a national sustainableinnovation system.

Regarding infrastructure development needs, the development ofmajor economic activities within Indonesia Economic Corridorsneeds to be supported by an abundant amount of energy resources.With the presence of Indonesia Economic Corridors, the electricityneeds in Indonesia is predicted to reach approximately 90,000

MW in 2025 (in peak condition). Electricity is used to supportthe development of major economic activities within the corridor.The fulfillment of energy and other infrastructure needs willcertainly require a significant amount of investments.

In terms of investment needs to support the development ofIndonesia Economic Corridors, indications show that IDR 4,021trillion will be invested. Of the total estimated investment, thegovernment will contribute around 10% in the form of basicinfrastructures such as roads, seaports, airports, railroads andpower plants. The remaining contribution will be provided, fromthe ro le o f the p ri va te s ector, BUMNs and others .

In general, MP3EI can be regarded as a manifestation of thecollaboration between the government and the business sector asan effort to develop a range of key sectors and to identifyinfrastructure needs to develop Indonesia’s potential. Many haverealized that the successful development of Indonesia in the futurerequires the participation of the business sector.

Hopefully, mutual commitment of various stakeholders could beestablished through MP3EI to transform Indonesia’s economy toachieve Indonesia’s vision of an independent, developed, just andprosperous society.(*)

18% 32% 24% 8% 3% 15%% invetmentper corridor

Indicated value ofinvestments based

on investors

Mix

BUMN

Government

Private Sector

21%

18%

10%

51%

IDR Trillion

4.000

3.000

2.000

1.000

Sumatera Java Kalimantan Sulawesi Bali - NusaTenggara

Papua -Maluku island

Total6 Corridors

0

714

1.290

945

309

233 622

4.012

Indications of Investments in the Major Economic Activities of 6 Corridors

Source: MP3EI 2011-2025, Coordinating Ministry of Economic Affairs


MP3EI BACKGROUND

Meanwhile, the explanation of Law No. 17/2007 whichis an integral part of the Law, explains that to achieveequitable distribution of development, regionaldevelopment will be implemented to improve the livingquality and welfare of the people as well as to equitablydistribute it.

The National Long Term Development Plan (RPJPN)2005-2025 has been endorsed and became the basis fordevelopment programs for a period of 20 yearscommencing from 2005 to 2025. In addition, RPJPN2005-2025 also serves as a guideline for the preparationof the National Medium Term Development Plan(RPJMN) which is a development program for the next5 years. The President’s vision and mission is conveyedin the RPJMN and it must also refer to RPJPN. Withinthis context, there is a clear relationship between RPJPNand RPJMN.

The question that arises is where is Indonesia economiccorridors positioned in the National DevelopmentPlanning System and how does it interrelate with RPJPNand RPJMN?

THE RELATIONSHIP BETWEENMP3EI AND RPJPN

MP3EI is developed with the vision “Creating anIndependent, Developed, Just and Prosperous IndonesianSociety“. This vision aligns with the nationaldevelopment’s vision as set out in RPJPN. Theinterrelated vision indicates that MP3EI is an integralpart of the National Development Planning System.

Another matter that indicates interrelation is periodicitybetween the two documents. The period of MP3EIstarts from 2011 to 2025. 2025 is also the end of theimplementation of RPJPN. Despite having the samecompletion period, the MP3EI document is not intendedto replace the RPJPN document. The MP3EI documentis actually a complementary document that integrateswith the RPJPN document and is specifically aimed atacce le ra t ing th e deve lopmen t o f Indones i a .

In the MP3EI document, the development of majoreconomic activities and the planned development offacilities and infrastructure to support economic activityare elaborated in greater detail with reference to theRPJPN. This is reflected in the vision “Creating anIndependent, Developed, Just and Prosperous IndonesianSoc ie t y” w hi ch w i l l b e ach i eved by 2025 .

Besides referring to RPJPN, the MP3EI document alsoconsiders the National Action Plan for ReducingGreenhouse Gas Emission (RAN-GRK) which is anational commitment related to climate change. Anotherdocument considered in the development of MP3EI isthe National Strategic Spatial Plan.

Given that the MP3EI document contains a variety ofstrategic infrastructure development plans which aimsto support economic activity, the development of variousfacilities and infrastructures should refer to the NationalStrategic Spatial Plan so a conflict does not arise betweeninfrastructure development and efforts to preserveprotected areas.

Law no. 25/2004 regarding the National Development Planning System hasmandated the integration of the long term, medium term and annual developmentplan. This also indicates that the Law acts as a legal umbrella for theimplementation of development plans in order to guarantee the achievementof the country’s goals.


MP3EI and RPJPN - RPJMN

THE RELATIONSHIP BETWEEN MP3EI AND RPJMN

The next question is what is the relationship between MP3EIand the RPJMN document? In terms of their period, the MP3EIdocument clearly has a longer implementation period comparedto the RPJMN document. The RPJMN document is a 5 yearperiod document which reflects the vision and mission of theelected President and Vice President. Annually, the RPJMNdocument is elaborated more technically through the formulationof the Annual Work Plan (RKP) which forms the basis for thedetermination of programs and budget allocation for every sectorand region.

Meanwhile, the MP3EI document is prepared with a periodcommencing from 2011 until 2025. Hence, several programs andactivities mentioned in the RPJMN document is a part of thedevelopment of Indonesia economic corridors which will beimplemented for approximately 15 years with reference to RPJPN.

There are several connections between the RPJMN document(RPJMN 2010-2014 currently becomes the reference for the 5year development p lan ) and the MP3EI documen t.

Firstly, the MP3EI document that contains a variety of Indonesia’seconomic development plan for 2011-2025 serves as a referencefor the formulation of RPJMN, particularly issues related toeconomic development and connectivity. By referring to theMP3EI document, the RPJMN document becomes the basis forthe formulation of RKP and Draft State Budget (RAPBN) so thevarious programs and major activities set forth in MP3EI couldbe implemented.

Secondly, the relationship between the MP3EI and RPJMN 2010-2014 document lies within the context of regional development.RPJMN 2010-2014 incorporates strategies and developmentdirections that are divided in several regions. Meanwhile, MP3EIhas also divided several economic corridors covering several islandssuch as Sumatera, Java, Kalimantan, Sulawesi, Bali-Nusa Tenggaraand Papua and Maluku Islands.

The Connection Between MP3EI and National Development Plan




Therefore, the development of policy and strategy directionsin RPJMN which divides the corridors according to eachisland must consider the development strategies set forthin the MP3EI document.

What about RPJM at the regional level? Considering thatthe locus of the development MP3EI is based on the divisionof areas, more specifically in Indonesia economic corridors,the role of the central government is merely limited toregulation formulation and investment allocation for thecentral government (government and private sector). Incontrast, the role of the regions grows larger where regionsact as the location and plays the role of the direct user ofthe determined corridors.

In addition, regions will also play a role in draftingregulations and determining investment allocation in theregion (government and private). Therefore, regions needto synergize the allocation of resources and the developmentof key sectors, infrastructures, and spatial planning withthe concep t o f Indone si a economic corr idor s.

Such synergy is realized with regulatory support, location,resources, and implementation through the developmentimplementation framework and determination of thedevelopment targets of regions as stated in the developmentplan of RPJMD and Regional Work Plan (RKPD). Withsuch synergy, Indonesia economic corridors are expectedto quickly be implemented and integrated in the centralor regional development plan. Therefore, the prioritizationof regional development plans is expected to support thedeveloped economic corridors.

SYNERGY BETWEEN PLANNINGDOCUMENTS

As a document, MP3EI contains various guidelines for thedevelopment of more specific major economic activitieswhich are equipped with infrastructure needs and severalrecommendations for changes/revisions of legislations.Nevertheless, synergy between the planning documents isrequ ired t o guarante e succe s s fu l deve lopm en t.

The Connection between MP3EI and Planning and Implementation


RPJMD

RenstraKL

Renja -KL RKA - KL Detail of

APBN

MP3EI(Indonesia’s

Economic Corridor)Refer

Guideline

Guideline

RPJPN

RPJPD

RPJMN

Consider

Elaborate

RenstraSKPD

RKP

RKPD

Renja -SKPD

Align with Musrenbang

MP3EIAction Plan

RAPBN

RAPBD

RKA -SKPD

APBN

APBD

Detail ofAPBD

UU SPPN UU KN

Guideline

Guideline

Guideline

Guideline

Guideline

Guideline

Elaborate Guideline

GuidelineGuideline

Refer

Refer

Refer Refer

Refer

Refer

Refer

Refer

Refer


Such synergy is realized with regulatory support, location,resources, and implementation through the developmentimplementation framework and determination of thedevelopment targets of regions as stated in RPJMD andRKPD.

As a planning document, the MP3EIdocument is closely related with theLong Term Development Plan (RPJP)and RPJMN. MP3EI is formulated byc o m b i n in g 2 ( t w o ) k i n d s o fapproaches, namely sector andregional (regional development)which are integrated into thedevelopment of economic corridors.Those 2 (two) kinds of approachesare also contained in the RPJMN andRPJPN planning documents whichalso combines sector and regionalplanning.

The sector approach is based on the identification of keysectors that has high development prospects globally and isbased on the idea that Indonesia has the potential andcapability for enhancing its competitiveness in the future.Meanwhile, regional approach or regional development isapplied to propagate the development of key sectors thathave been determined the 6 (six) identified economiccorridors.

To support the development of a region’s key potentials andto create planning synergy with the central government,planning in areas that serve as the location for theimplementation of economic corridors should be focused onthe following issues:

a. Acceleration on the determination of the ProvincialStrategic Spatial Plan (RTRW) to resolve the conflict ofthe utilization of land between forest, agriculture andmining areas;

b. Lack of law enforcement. Security and order threats arestill relatively high, including in tourism areas. Therefore,local governments should increase security and orderthrough the implementation of strict rules and sanctionsfor offenders;

c. Harmonization of laws and regulations. The localgovernment together with the central government shouldincrease the harmonization of laws and regulations.Obstacles in inter region trade which can potentiallycreate high economy costs in the form of levies and taxduplications must also be reduced; and

d. Coordination between the central, provincial and regionalgovernments to develop the area into an economiccorridor.

By considering the differences in the characteristics of eachregion, development synergy between regions is the answerto encourage increa sed product ivi ty and na tionalcompetitiveness by prioritizing efficient and effectivemanagement of natural resources in order to encourageharmony and balance of inter region development, observesustainable development principles and maintain sustainabledevelopment.

The strong role of the government will guarantee synergy inall existing development plan concepts of RPJPN, RPJMN,RKP, RPJPD, RPJMD, RKPD, Indonesia economic corridorsand various Regional Master Plans. The synergy of variousdevelopment plan concepts will result in the achievement ofthe desired development targets both at regional and nationallevels.

Such synergy is realized with regulatory support, location,resources, and implementation through the developmentimplementation framework and determination of thedevelopment targets of regions as stated in RPJMD andRKPD.

With such synergy, acceleration and expansion efforts ofIndonesia’s economic development through each economiccorridor is expected to quickly be smoothly implementedand integrated in the central or regional development plan.Therefore, the prioritization of regional development plansis expected to support the acceleration of the developmentof the determined regions. (*)



Those six economic corridors include the Sumatra, Java,Kalimantan, Sulawesi, Bali, Nusa Tenggara, and Papua –Maluku Islands corridor. Intra regional connectivity will bedeveloped in each corridor to connect the main economiccenters in each corridor internally and externally with othercorridors and the world market.

Furthermore, connectivity strengthening aims to expandeconomic development to the surrounding areas, especiallyto underdeveloped, remote and border areas. Hence, successfulacceleration and expansion of Indonesia’s economicdevelopment depends on how strong Indonesia’s nationaland international economic connectivity is.

Increased connectivity in those six economic corridors isbased on the integration of the four elements of nationalpolicy which consists of the National Logistics System(Sislognas), the National Transportation System (Sistranas),

Regional Development (RPJMN/RTRWN) and Informationand Communication Technology (ICT). Integration isperformed to achieve effective, efficient and integratednational connectivity in order to enhance nationalcompetitiveness.

The integration of the four main elements aims to achievethe vision of national connectivity which is locally integratedand globally connected. Locally integrated means integratingthe existing connectivity system effectively and efficientlyto support the mobilization of goods, services and peopleto all parts of Indonesia.

To develop an integrated local connectivity, transportationnetworks must be integrated with the transportation hubs.In addition to transportation networks and to supportconnectivity, telecommunications and information networksshould also be integrated.

THE CONNECTIVITY OFSIX ECONOMIC CORRIDORSThe Master Plan for the Acceleration and Expansion of Indonesia’s EconomicDevelopment (MP3EI) has developed six economic corridors which are groupedaccording its territory based on the natural resources potential possessed by eachterritory by considering inter region connection.


ECONOMIC CORRIDOR

Such connectivity integration should be established in all regions inIndonesia. Some areas in eastern Indonesia tend to have minimaltransportation networks due to its geographical condition and otheraspects. At least, we must observe how to integrate connectivityeffectively and efficiently to encourage equitable development betweenregions.

Meanwhile, globally integrated means effective and efficient nationalconnectivity system which interrelates with one another and acts asa door to the international world. In this case, the development ofseaports and airports that have trade and industrial facilities as wellas an effective and efficient custom will become the key for achievingthat goal.

In terms of connectivity, the Government is the driving force of thecreation and development of basic infrastructures to support economicintegration. In order to support economic integration, the governmentcan identify transportation hubs and distribution centers to facilitatethe logistical needs for main and supporting commodities and enhancecommunications and information technology networks to facilitateall economic activities, government activities and the nationaleducation sector.

When developing the connectivity system in an economic corridor,effectiveness and efficiency and global connectedness is the mainfactor that must be achieved. Some principles should be consideredto achieve it, such as: (1) enhanced flow of goods, services andinformation, (2) reduced logistics costs, (3) reduced cost inefficiencies,(4) realized equitable access across the region, and (5) realized synergybetween growth centers.

With regards to efforts to strengthen connectivity in six economiccorridors, below are several enhancements that focus to encouragethe development theme o f e ach economic corr idor.

Connectivity Development of SumatraEconomic Corridor

Sumatra Island has great potential as a growth center in the ASEANsub region, Asia Pacific and other international areas. In addition,Sumatra Island has the most strategic trading access compared toother major islands in Indonesia. It possesses a complete set of naturalresources such as agriculture, plantation, fishery, forestry and mining.

Four Main Elements that Form National Connectivity


ECONOMIC CORRIDOR


Based on this factor, Sumatera Economic Corridor is developed asa “Center for Production and Processing of Natural Resources andAs Nation’s Energy Reserves”. The development of Sumatera EconomicCorridor is directed to several main economic activities such as thedevelopment of palm oil, rubber, coal and steel.

To support the development of each main economic activity, effortsto enhance connectivity such as the construction of toll roads andrailway lines is required. Sumatra is strategically positioned as it isadjacent to another country. Therefore, connectivity strengtheningfocuses on the development of international hubs such as hub portsfor international shipping lines on the eastern and western coast ofSumatera as an alternative to open and expand developmentopportunities outside Java, while reducing Java’s load.

Connectivity Development of JavaEconomic Corridor

The rapid economic growth in Java is not balanced or supported byadequate natural resources. On the other hand, Java has more adequateinfrastructures compared to other areas outside Java. Java remainsto be the most attractive island for investments as it has more adequateinfrastructures and is home to the center of administration. Therefore,Java Economic Corridor is developed to become the “Driver forNational Industry and Service Provision”.

Connectivity strengthening through infrastructure development isfocused on the northern part of Java which is marked by theconstruction of the Trans Java Roll Road and railway line whichconnects loci in order to smoothen the movement of commoditiesfrom north to south Java and vice versa. In addition, seaports andairports are also developed as an attempt to smoothen the flow ofcommodities within the corridor and between corridors.

The development of major economic activities and connectivity inJava Economic Corridor is expected to address the disparity issue ofthe Gross Regional Domestic Product (GRDP) between regions aswell as to encourage greater global integration.

Connectivity Development of KalimantanEconomic Corridor

Aside from possessing adequate amount of natural resources in theagriculture, mining and fishery sector, Kalimantan is the developmentcenter in Eastern Indonesia. It is strategically positioned and supportsinter regional cooperation. Furthermore, Kalimantan has an enormouspotential in the mining sector (oil, gas, gold and coal), forestry(wood), plantation (palm oil and rubber) as well as sea and landfishery.

The Framework of National Connectivity



The development of Kalimantan Economic Corridor is designatedto become the “Center for Production and Processing of NationalMining and Energy Reserves”. The main economic activities inKalimantan Economic Corridor will focus on the four economiccenters of Pontianak, Palangkaraya, Banjarmasin and SamarindaCity which are connected through the Corridor Connecting Line.In accordance with the Acceleration and Expansion of Indonesia’sEconomic Development, several major economic activities havebeen identified. These major economic activities have a potentialto support economic growth in Kalimantan Economic Corridorin the future, namely: iron steel, bauxite and timber.

As a large region, some major economic centers in Kalimantanmentioned in the spatial plan of Kalimantan will be connectedwith the Trans Kalimantan road and railway network which willbe integrated with river transportation. With many privatecompanies engaged in the mining sector in Kalimantan,infrastructure development in Kalimantan will be conductedthrough the infrastructure development consortium model.Through this model, companies engaged in mining, coal inparticular, will share the development and usage of infrastructuressuch as railway and roads so efficiency will be increased.

Connectivity Development of SulawesiEconomic Corridor

Sulawesi is the development center in Eastern Indonesia, isstrategically positioned and supports inter regional cooperation.In addition, the region possesses adequate natural resources in

the agriculture, mining and fishery sector. Sulawesi Island has agreat potential in the plantation sector (cocoa, cloves, coffee andcashew nut), marine fishery (tuna and skipjack), crops (rice andcorn) and mining (nickel, asphalt and marble).

Based on the various existing potentials, Sulawesi EconomicCorridor developed as the “Center for Production and Processingof National Agricultural, Plantation, Fishery, Oil & Gas, andMining”

Infrastructure Development in Sumatera focuses on the movementof goods (crops and mining products) to a processing or industrialarea which will then be transported to the port. Water and energyinfrastructure development also applies the same focus. Waterand energy infrastructure is developed to support the productionof agriculture, plantation and mining in every province.

The development of Sulawesi Economic Corridor will evolve inaccordance with the construction and existence of Trans SulawesiToll Road which links South Sulawesi with North Sulawesi. Inaddition, given that the corridor is located by the Pacific Oceanand international shipping line, several locations should bedetermined to function as international hubs. Hopefully, thedetermination of international hubs in Eastern Indonesia willaccelerate development in Eastern Indonesia which is dominatedby islands.

ILUSTRATION OF THE ECONOMIC CORRIDOR


ECONOMIC CORRIDOR


Connectivity Development of Bali – NusaTenggara Economic Corridor

As an integrated region, the region of Bali – Nusa Tenggara actuallyhas huge development potential due to its natural resources inparticular, livestock, fishery and tourism. The large marine fisheryresources potential have not been managed optimally yet. Thepotential of field, forest and plantation resources is also large sothere is an opportunity to manage those natural resources forregional economic development.

The Development of Bali – Nusa Tenggara Economic Corridoris designated to become the “Tourism Gateway and National FoodSupport”. In the long run, tourism activities in this corridor willbecome the driving force of economic development in Bali – NusaTenggara Economic Corridor. This can be achieved through thediversification of tourism products, expansion of tourism area,sustainable development of the competitiveness of tourismdestinations and the development of a market share with highpurchasing power.

Infrastructure development is conducted in line with thedevelopment of tourism destinations within the corridor. Thedevelopment of farming activities will be pursued consistentlythrough the development of advanced technology to improve thequality of cattle, integrate faming activities with crops to guaranteethe food source for livestock, develop processing industries andincrease the capacity of road and seaport infrastructures for thedistribution of farm products.

By considering the geographical condition of this corridor whichcomprises of islands, transportation in Bali – Nusa TenggaraEconomic Corridor is developed with an emphasis on land, seaand air connectivity which connects islands and provinces.

This connectivity system will support all major economic activities(tourism, farming and fishery) as well as other activities that havehigh investment value. Mining exploration is not prioritized inthis corridor because it would deliver negative impacts on thetourism, fishery and farming sector. Seaport and airport developmentis prioritized for existing ports located adjacent to the majoreconomic activity loci in order to make it more effective, efficientand to minimize transportation costs.

Connectivity Development of Papua – MalukuIslands Economic Corridor

Maluku Islands has a large development potential due to its naturalresources, especially fishery and marine tourism. It has massivemarine fishery resources potential but it has not been managedoptimally yet. In contrast, Papua still has a great opportunity fordevelopment in terms of natural resources, especially mining,forestry, fishery, plantation and marine tourism.

Based on various existing potentials, Papua – Maluku IslandsEconomic Corridor is developed to become the “Center forDevelopment of Food, Fishery, Energy and National Mining”.

The development of Papua – Maluku Islands Economic Corridorwill focus on the preparation of the Sofifi-Ambon-Sorong-Manokwari-Timika connectivity. Merauke Integrated Food andEnergy Estate in Merauke which is presently being developedshould be supported by the preparation of internationally scaledinfrastructures with the development of airports and seaports.

In addition, land connectivity from Timika-Jayapura-Meraukeshould also be developed in line with the growing economic centersin each corridor hubs. Considering that the costs required for thedevelopment of this area is very large, foreign funds may be required.Therefore, the government can start the feasibility study on thedevelopment of the area to ease the marketing of those areas toattract investors. (*)


As a result, various problems such as high price disparity betweenregions arise. These problems remain to be a major obstacle in thedevelopment of competitive main economic corridors, particularlyin eastern Indonesia.

The condition expected from inter region connection is strongnational economic connectivity (intra and inter region) as well asstrong international economic connectivity between Indonesia andthe world market. Indonesia’s national connectivity is an integraland inseparable part of global connectivity. Therefore, Indonesia’snational connectivity must be connected with regional and globaleconomic centers in order to enhance national competitiveness.

Strengthening the national connectivity is essential to maximize thebenefits of regional and global/international connectivity. This canbe realized through the integration of the four elements of nationalpolicy which consists of the National Logistics System (Sislognas),the National Transportation System (Sistranas), Regional Development(RPJMN / RTRWN) and Information and CommunicationTechnology (ICT / ICT).

In the connectivity scheme of planning documents (see the schemeon the connection between the Master Plan for the Acceleration andExpansion of Indonesia’s Economic Development (MP3EI) and thenational development plan document), it is clear that the MP3EIdocument must be restructured in the form of an action plan. The

action plan should be closely associated with the Government WorkPlan (RKP) and is used to develop the Draft State Budget (RAPBN).In addition, the MP3EI document also aims to become a guidelinefor the development of investment policies for the private sector andPublic Private Partnership (PPP).

MP3EI ACTION PLAN

Indonesia needs to provide infrastructures which aims to supporteconomic activities. Infrastructure availability has a broad spectrum.Infrastructures that encourage inter region connectivity should receivemain attention to accelerate and expand economic development inIndonesia.

Infrastructure provision that support connectivity will reducetransportation and logistics costs, also increasing the competitivenessof products and accelerating economic movement. Infrastructureconnectivity includes the development of transportation and ICTlines along with all related rules and regulations.

Such connectivity must be supported by the national transportationsystem that synergizes with multi and inner transportation modesby considering the characteristics of each transportation mode,regional development, geographical aspects, region specific factorsand selection of appropriate technologies.

National inter region connectivity system and its linkage with global connectivity is requiredto support national economic integration. The national logistics system failed to operateefficiently and effectively due to lack of support from domestic connectivity, technology andreliable information system.


ACTION PLAN

The Strengthening National Connectivity action plan in MP3EIaims to: (1) connect major economic growth centers in order tomaximize growth, (2) expand economic growth through increasedaccessibility of economic growth centers and (3) widely disseminatethe benefits of development (inclusive and equitable growth) throughthe enhancement of connectivity and basic services in underdeveloped,remote and border areas to ensure equal distribution of development.

Specifically, the purpose of the development of the MP3EIConnectivity Master Plan are to (1) Become a guideline that includesgoals, strategies, and policies on the acceleration of the implementationof the development and funding of MP3EI activities that encouragenational connectivity; (2) Become a guideline for the EconomicCorridor Team and activity implementers in accordance with thegoals and targets of MP3EI activities that encourage connectivitywhich will be implemented in 2011-2012; (3) Coordinate andsynchronize the existing resources at the central, provincial andregency/municipal level in the corridor to increase efficiency in theimplementation of 2011-2012 MP3EI activities; either in terms offunding from the State Budget, Provincial Regional Budget (APBD),Regency/Municipal APBD, contributions from donor institutionsand PPP or other sources of funding; and (4) Provide inputs for theformulation and improvement of planning documents in the centraland regional level.

The connectivity action plan in the MP3EI framework is formulatedbased on two principles.

First, the implemented connectivity action plan is expected to provideadded value to the existing infrastructures. Added value can be gainedby improving the condition of existing facilities infrastructures,improving infrastructure management and efficient usage ofinfrastructures.

Second, the connectivity action plan is implemented with a focuson increased amount of infrastructures and new infrastructures.These two items could be implemented inter corridor and withina certain corridor. Inter corridor means that the connectivity actionplan could be implemented in all corridors or is not just focused onone specific corridor with activities in the form of policy or regulationformulation for small scaled projects. In contrast, certain corridormeans that the activities of the action plan only focus on certaincorridors and is project based.

The action plan is expected to strengthen national connectivity thatfocuses on several national development priorities related to physicalconnectivity such as the development of ports, airports, railway, androads in the transportation sector; energy development; nationallogistics system and ICT development which have been divided ineach economic corridor.

Concepts of Gate Port and International Airport in the Future



The action plan for the period of 2011-2015 is the first phase ofthe quick win phase. In this phase, activities are focused to shapeand operate MP3EI implementing institutions which will developan action plan for debottlenecking regulations, licenses, incentivesand the development of supporting infrastructures needed andrealize investment commitments (quick wins).

Policy and regulation formulation in this first phase emphasizeson inter corridor development. In addition, national connectivityis strengthened especially with the determination of global hubsfor seaports and airports in the corridors in Western and EasternIndonesia.

Another issue developed in the first phase of the formulation ofthe MP3EI Action Plan is the preparation of high quality humanresources. This corresponds to the demographic bonus thatIndonesia holds until 2030. The preparation of human resourcesin focused on the establishment of centers of excellence relatedto the main economic corridors of each corridor. This is a firststep towards the development of ICT capacity.

Specif ically, in the short term, MP3EI focuses on theimplementation of various action plans which must be completedby 2014. The short term action plan aims to ensure that strategicinitiatives can be implemented and can serve as a basis for theacceleration and expansion of economic development in subsequentphases.

In the second phase (2016-2020), the activities will be focusedto accelerate the development of long term infrastructure projects,strengthen innovation ability to increase the competitiveness ofMP3EI main economic activities, enhance economic governancein various fields and encourage the expansion of industrialdevelopment which will create added value.

In the third phase (2021-2025), MP3EI activities will emphasizeon strengthening industrial competitiveness to win the globalcompetition and the application of high technology for sustainabledevelopment.

PRIORITIZEDCONNECTIVITY ACTIVITIES IN MP3EI

Prioritized connectivity activities in the first phase is divided intotwo parts, namely inter corridor prioritization and corridorprioritization. Corridor prioritization is an activity performed bythe ministries/institutions of each corridor. Funding for such

activity derives from APBN and is supported by funds from StateOwned Enterprises (BUMNs)/APBD/Private Sector. The activitiesmentioned in the MP3EI Action Plan are prioritized activitiesaimed to overcome the strategic issues of each corridor inaccordance with the economic potentials possessed by eacheconomic corridor.

Following are several prioritized connectivity activities that aredivided according to its corridor in the MP3EI action plan:

Firstly, Sumatra Economic Corridor. The prioritized connectivityactivities in this corridor focus on improving the quality of roads,railways, electricity and port services in order to develop maineconomic activities such as palm oil, rubber, coal and steel industry.Furthermore, inter connectivity development in the corridors ofSumatra and Java is also prioritized through the construction ofSunda Strait Bridge (JSS).

Secondly, Java Economic Corridor. Prioritized connectivityactivities are focused to increase electricity provision, improveservice in major ports in Jakarta, Semarang and Surabaya todevelop the main economic activity of textile and to construct ofjetties to support the shipping industry. In the telematics sector,connectivity is prioritized on the development of securecommunication and information systems. Meanwhile, Jabodetabekarea is developed through various prioritized activities such asairport and seaport development, monorail construction and thedevelopment of a flood control system in Jabodetabek.

Thirdly, Kalimantan Economic Corridor. Prioritized connectivityactivities in this corridor focus on the development of coal railwaynetworks, improvement and increase of river and seaport capacity,


ACTION PLAN

National Connectivity Vision


improvement and increase of power plant capacity andimprovement of road access for the economic activities of palmoil, steel and bauxite.

Fourthly, Sulawesi Economic Corridor. Prioritized connectivityactivities in this corridor focus on the improvement of accessroads and irrigation facilities to support the main economicactivity of agriculture. Meanwhile, to support the main economicactivities of cocoa and nickel, several activities are prioritized toincrease port capacity, road capacity, electricity supply, watersupply and telecommunications access.

To develop the fishery economic activity, the following activitiesare prioritized: the development of fishing ports and Fish ProcessingUnits (UPI) and the construction of fish storage facilities. Inorder to develop the main activity of oil and gas, oil and gasrefining infrastructures as well as fuel storage facilities are required.

Fifthly, Bali-Nusa Tenggara Economic Corridor. Prioritizedconnectivity activities in this corridor focus to enhance airportdevelopment, enhance capacity bui lding, develop roadinfrastructures and construct new power plants to support themain economic activity of tourism, increase fishery production,develop the salt business and support livestock production.

Sixthly, Papua – Maluku Islands Economic Corridor. Prioritizedconnectivity activities in this corridor focus on the developmentof water resources infrastructure networks, improvement anddevelopment of sea and river ports, improvement and developmentof roads and bridges, construction of power plants to support thedevelopment of the main economic activities of palm oil, copper,nickel, oil and gas and fishery.

All of the prioritized connectivity activities in MP3EI areimplemented through synergized development between the centraland local government as well as between regions. Synergizeddevelopment between regions is implemented by strengtheningnational connectivity that utilizes the regional and global geostrategic position. This will become the backbone that formsnational connectivity and is expected to function as an instrumentfor creating balance in regional economy.

This does not only encourage equitable distribution of economicactivities to all parts of Indonesia, it can also create independenceand competitiveness of an integrated national economy. (*)

Java Economic Corridor

21National Connectivity 2011 Special Edition - SUSTAINING PARTNERSHIP


In 2025, Indonesia will gain a title as a developed country withan income per capita ranging from USD 14,250 – 15,500 witha Gross Domestic Product (GDP) of about USD 4.0 - 4.5 trillion.

To realize this vision, the real economy must grow by 6.4% to7.5% in the period of 2011 – 2014 and approximately 8.0% to9.0% in the period of 2015 – 2025. Economic growth must beaccompanied by inflation reduction of 6.5% in the period of 2011– 2014. Therefore, the inflation rate will become 3.0% in 2025.

How could Indonesia 2025 vision be achieved? At least, there arethree main strategies in MP3EI. Firstly, develop economic potentialthrough the economic corridors. Secondly, strengthen nationalconnectivity. Thirdly, strengthen human resource capacity andnational science.

The strategy of national connectivity must be supported becauseas the world’s largest archipelagic nation, Indonesia has a vastterritory. Indonesia stretches for 5,200 km long and is 1,870 kmwide. Facts on the f ield shows that lack of inter is landtransportation has increased distribution costs, thus drasticallyincreases the price of goods.

The economies become focused on intra island economy and notinter island economy. Economic differential power is scatteredon various islands. As a consequence, it could not be united dueto the absence of connective modes.

If domestic connectivity is good, the world will indirectly becloser to Indonesia because the country’s geographical locationis very strategic as it is located adjacent to Malacca Strait whichis the main route for global container ships.

In relation to the development of national connectivity,infrastructure development must be prioritized. For instance isthe development of roads, ports, airports until supportinginfrastructures such as water.

Despite that infrastructure development is the government’s duty,the government has limited funding ability. Therefore, thegovernment has included 33 Public Private Partnership (PPP)projects in the MP3EI document.

According to the calculation of the Ministry of National DevelopmentPlanning (PPN)/National Development Planning Agency (Bappenas),the target for funding of infrastructure development financed by thePPP scheme will reach IDR 327.8 trillion.

Opinion About Connectivity in MP3EI

Prioritization of ConstructionOn 20th May 2011, President Susilo Bambang Yudhoyono signed the “Master Plan for theAcceleration and Expansion of Indonesia’s Economic Development” or MP3EI. This MasterPlan will be implemented in 2011 – 2025 with the hope that Indonesia will stand equally withdeveloped countries in the world.

EXPERT OPINION


PPP PROJECTS

“PPP projects are encouraged to strengthen infrastructureavailability,” said the Director for Public Private PartnershipDevelopment of the Ministry of PPN/Bappenas, Bastary PandjiIndra.

Some of the toll road projects which will be built with the PPPscheme among others include Medan-Kualanamu-Tebing TinggiToll Road, Palembang-Indralaya Toll Road, Pekanbaru-DumaiToll Road, Balikpapan-Samarinda Toll Road and Manado-BitungToll Road.

On the other hand, some airport and seaport projects include theexpansion of Tanjung Priok Port, Kertajati International Airport,Kulonprogo International Airport and the construction of MaloyPort in East Kalimantan.

For Vice Minister of Transportation, Bambang Susantono, themost important factor in the implementation of MP3EI is thecommencement of construction work. “What must be prioritizedis construction, construction and construction,” he said. Accordingto him, the government is trying to meet the demand. The mainfunction of development is to reduce the widening gap betweendemand and supply.

Presently, the government and State Owned Enterprises (BUMN)have started physical work. Angkasa Pura II, for instance, hasinitiated the construction of the first foundation at Depati AmirAirport in Pangkalpinang on 24th October 2011; Taha SultanAirport in Jambi, last Monday; and Supaio Airport in Pontianak,Kalimantan is planned to follow on 27th December 2011.

There are three strategies that can be used to realize infrastructuredevelopment. Firstly, simpli fy the licensing process for

infrastructures that will be built by the private sector. The railwayconstruction in East Kalimantan is an example of suchsimplification. Secondly, focus on the usage of State Budget(APBN) such as in the construction of the double railway tracksof Pantura line.

Thirdly, empower the ability of BUMNs to accelerate thedevelopment of projects such as the delegation of railwaydevelopment to PT. Kereta Api Indonesia/Indonesia RailwayCompany (PT. KAI). In addition, several initiatives areimplemented by the Indonesia Port Corporation II (PT Pelindo)to construct port facilities.

Chairman of the Indonesian Transportation Society (MTI),Professor Danang Parikesit, of the Faculty of Engineering, GadjahMada University in Yogyakarta revealed that there is optimismin the implementation of MP3EI. “Various teams have beenformed and they have started working. The results are alsobeginning to appear”, he said.

Danang hopes that in 2012, various large scale infrastructureprojects will be implemented. “In fact, these projects have beenscheduled since a long time ago. Therefore, MP3EI only introducesold projects with a new face,” he said.

What Danang means by new face is the categorization of projectswithin economic corridors. Hence, development can be moreprioritized and focused.

The classic problem in infrastructure development in Indonesiais land acquisition. The Land Acquisition Bill plays a crucial rolein encouraging the smooth implementation of infrastructureprojects, especially those that require a vast amount of land suchas toll roads.


Moreover, the President Director of PT. Jasa Marga Tbk, FransS. Sunito for example, has always been saying, “In this world,only the land acquisition process in Indonesia is conductedthrough deliberation”.

As an illustration, the construction of the Trans Java Toll Roadthat connects Jakarta – Surabaya has not been completed due toslow land acquisition. Another example is the construction of thenew runway at Soekarno – Hatta International Airport inCengkareng which requires 830 hectares of land. With the newlegislation, the land acquisit ion process wi ll be faster.

The Land Acquisition Law which consists of 62 chapters is quiteprogressive. In fact, some articles state that compensation doesnot only come in the form of ca sh, but also shares.

REVISION OF MP3EI

In its development, the National Logistics System (Sislognas)blueprint that aims to support MP3EI is also subject to criticism.For example, the master plan of Sislognas is considered to ignorethe development and improvement of land transportation suchas logistics trucks.

“In fact, 90% of goods in Indonesia are transported by logisticstrucks. These trucks have not been touched by Sislognas to supportMP3EI,” said the Chairman of the Land TransportationOrganization (Organda), Eka Sari Lorena, when asked for heropinion about MP3EI.

Eka shows that from the 11 programs included in quick wins,there is no program which explicitly discusses land transportation.The 7th point only mentions that the balance of competitionbetween land and sea transportation.

Ironically, data from MP3EI which quoted from the founder ofIndependent Research Advisory Indonesia, Lin Che Wei, statesthat the portion of investment in road infrastructure is 19%. Thisis larger than railway (18%), ports (7%) and airports (2%).

“Roads are constructed without improving the users. Therefore,no matter how long roads are built, it will never meet the roaddemand because road users will never be efficient,” said Eka.

In essence, said Eka, how could we mobilize goods and peopleeffectively within the economic corridors if the plan is not wellprepared? “Presently, there are 6 million units of tucks in Indonesiawhere 64% are aged between 10-24 years. Do not talk aboutefficiency,” said Eka. He added that it is difficult rejuvenate truckswithout government incentives.

“We need 60,000 trucks per year but the domestic automotiveindustry is only capable of providing 30,000 trucks per year. Wewish to import trucks, but we are constrained in doing so,” hesaid.

For Eka, many detailed plans in MP3EI should be reviewed andfocused more. “I see that many policies are made in the room.More benefits could be obtained if we talk more with the fieldoperators, “he said.

Meanwhile, Djoko Setijowarno an expert in transportation fromSoegijapranata Catholic University reminded various parties toalways observe projects overseen by the local government.

“We should avoid the situation where transportation infrastructureshave been constructed but the government does not develop thetransportation modes and production centers. Keep an eye onhow village roads are constructed and maintained. Do not allowhigh economic costs to arise due to the local government’signorance in developing the transportation networks in the region,”said Djoko.

Similar to other projects, MP3EI is in the mid-term phase wherethe era is rapidly changing. Thus, it is crucial that programsshould be more focused and revised. This should not be avoidedas purely intends to accelerate development in this country. (*)


EXPERT OPINION

33 PPP PROJECTS TO SUPPORT MP3EIThe government has included 33 Public Private Partnership (PPP) Projects in the Master Plan for the Acceleration and Expansionof Indonesia’s Economic Development (MP3EI) document. The Directorate of Public Private Partnership Development (PKPS)of the Ministry of National Development Planning (PPN)/National Development Planning Agency (Bappenas), stated that thepr o j e c ts w e re de l i b e ra te l y i nc l uded in t he MP 3EI p r og ra m t o acce le r a t e i n f ra s t r u c tur e d ev e lopm en t.

Bappenas has set a target of IDR 327.8 trillion of funds to finance infrastructure development in the MP3EI document with thePPP scheme. That amount of funds is an accumulation of 33 PPP projects listed in the MP3EI document. The 33 PPP projects aslisted in the PPP Book.

No Project Title ProjectEstimation Value (million) Location / Corridor Planned Operation

South Banten Airport

Expansion of Tanjung Priok Port

Medan-Kualanamu-Tebing Tinggi Toll Road

Strategic Infrastructure and Regional Development of Sunda Strait

DKI Jakarta-Bekasi-Karawang Water Supply (Jatiluhur)

USD 213,61

USD 1.170,61

USD 670.40

USD 25.000

USD 189,30

Pandeglang Regency, Banten/ Java

Kalibaru Sub District, DKI Jakarta/ Java

North Sumatera/Sumatera

Banten & Lampung/ Java -Sumatera

DKI Jakarta & West Java / Java

2015

2015

2015

2021

2014

1

2

3

4

5

READY FOR OFFER PROJECTS

These cover PPP projects that have met the following criteria: (i) The tender document has been completed, (ii) The PPP tendercommittee has been established and is ready to operate, (iii) The tender scheduled has been determined, (iv) Government supporthas approved (if required).

Below is the list of ready for offer projects:

PROJECTS IN TRANSACTION PROCESS

Below is the list of projects in transaction process:


Umbulan Water Supply

Central Java Coal Fired System Power Plant 2.000 MW

Soekarno-Hatta Airport Manggarai Railway Development

Puruk Cahu-Bangkuang Coal Railway

East Java / Java

Central Tengah / Java

DKI Jakarta / Java

Central Kalimantan/ Kalimantan

2014

2015

2013

2014

1

2

3

4

USD 204.20

USD 700

USD 204.20

USD 2,100


P P P P R O J E C T

PRIORITY PROJECTS

Are PPP projects that have met the following criteria: (i) Included in the Potential PPP Project Plan proposed by the contractor asan unsolicited project, (ii) Based on the pre feasibility, the project is legally, technically, and financially feasible; (iii) Risk identificationand its allocation has been identified, (iv) The PPP scheme has been determined, (v) Government support has been identified (formarginal projects).

Below is the list of priority projects:

Medan-Binjai Toll Road (15,8 km)PPP Modality:> Land acquisition cost and part of construction will be carried out

by government.> The concession period will be granted for 35 years.

Palembang-Indralaya Toll Road (22 km)PPP Modality:> BOT (Build-Operate-Transfer)> The concession period will be granted for 35 years.

Tegineneng-Babatan Toll Road (50 km)PPP Modality:> BOT> The concession period will be granted for 35 years.

Kemayoran-Kampung Melayu Toll Road (9,65 km)PPP Modality: BOT

Sunter-Rawa Buaya-Batu Ceper Toll Road (22,92 km)PPP Modality: BOT

Ulujami-Tanah Abang Toll Road (8,27 km)PPP Modality: BOT

Pasar Minggu-Casablanca Toll Road (9,56 km)PPP Modality: BOT

Sunter-Pulo Gebang-Tambelang Toll Road (25,73 km)PPP Modality: BOT

Duri Pulo-Kampung Melayu Toll Road (11,38 km)PPP Modality: BOT

Toll Road Access to Tanjung Priok (16,67 km)PPP Modality:> Design and construction work will be conducted by the government> Operation and maintenance will be offerred to the private sector

through tender mechanism

Pasirkoja-Soreang Toll Road (15 km)PPP Modality:> BOT> The concession period will be granted for 35 years.

North Sumatera /Sumatera

South Sumatera /Sumatera

Lampung - SouthSumatera

DKI Jakarta/Java

DKI Jakarta/Java

DKI Jakarta/Java

DKI Jakarta/Java

DKI Jakarta/Java

DKI Jakarta/Java

DKI Jakarta/Java

West Java / Java

Solicited

Solicited

Solicited

Solicited

Solicited

Solicited

Solicited

Solicited

Solicited

Solicited

Solicited

USD 120,40

USD 124,90

USD 318,20

USD 695,40

USD 976,10

USD 425,50

USD 572

USD 737,80

USD 596

USD 612,50

USD 143,50

1

2

3

4

5

6

7

8

9

10

11

2015

2015

2015

2014

2014

2014

2014

2014

2014

2012

2015

No Project Title ProjectEstimation Value (million) Location / Corridor Type of

ProposalPlanned

Operation


PPP PROJECT

POTENTIAL PROJECTS

Are PPP projects that have met the following criteria: (i) Have complied with the National/Regional Medium Term DevelopmentPlan (RPJMN/RPJMD) and infrastructure strategic plan, (ii) The project location suits the Regional Strategic Spatial Plan (RTRW),(iii) A relationship is established between the infrastructure sector and the region, (iv) Recovery of potential costs, (iv) Preliminarystudy.

Below is the list of potential projects:


2015

2015

2016

2015

2016

2016

2016

2015

2014

USD 800

USD 99.50

USD 500

USD 1.700

USD 844,60

USD 705

USD 260,90

USD 82,40

USD 375.66

Majalengka, West Java / Java

East Kalimantan / Kalimantan

DI Yogyakarta / Java


Pekanbaru, Riau / Sumatera


North Sulawesi / Sulawesi

Kota Semarang, Central Java / Java

West Java / Java

1. Kertajati International Airport

2. Development of New Samarinda Airport

3. Kulonprogo International Airport

4. Development of Maloy International Port (874 ha)

5. Pekanbaru-Kandis-Dumai Toll Road (135 km)

6. Balikpapan-Samarinda Toll Road (84 km)

7. Manado-Bitung Toll Road (46 km)

8. West Semarang Municipal Water Supply

9. Jatigede Water Supply

Cileunyi-Sumedang-Dawuan Toll Road (58,50 km)PPP Modality:> BOT> The concession period will be granted for 35 years.

Terusan Pasteur-Ujung Berung-Cileunyi-Gedebage Toll Road (27,50 km)PPP Modality:> BOT> Land acquisition cost and part of construction will be carried out by

government.

Pandaan-Malang Toll Road (37,62 km)PPP Modality:> BOT> The concession period will be granted for 35 years.

Nusa Dua-Bandara Ngurah Rai-Benoa Toll Road (9,70 km)PPP Modality:> BOT> The concession period will be granted for 35 years.

West Java / Java

West Java / Java

East Java / Java

Bali/Bali-Nusatenggara

Solicited

Solicited

Solicited

Solicited

2015

2015

2015

2015

USD 1.015,80

USD 800

USD 293,20

USD 196,10

12

13

14

15

No Project Title ProjectEstimation Value (million) Location / Corridor Type of

ProposalPlanned

Operation


An amphibious aircraft parked on Kahayan River,Palangkaraya, Central Kalimantan. The lack ofairport facilities forces certain parties to chartersmall aircrafts that could land on the river.

The Issue of Connectivity in Indonesia. Sustaining Partnership. Media for Information on Public Private partnership. Special Edition December 2011

Documents

issue of national connectivity

territory connectivity

corridor connectivity

action plan

massive mp3ei program

national science

indonesias income

master plan