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[Bruce Gale] Stakes on growth plan

No other president has invested as much political capital in a national development program.

This assessment by Danareksa Research Institute’s chief economist Purbaya Yudhi Sadewa of a new economic blueprint launched by President Susilo Bambang Yudhoyono on May 27 says it all.

Since his reelection in 2009, Yudhoyono has tried various means to stimulate economic growth by improving the performance of the nation’s lethargic and corruption-ridden bureaucracy.

The Presidential Working Unit for Development, Supervision and Oversight (UKP4), which reports directly to the Cabinet on the implementation of key national projects, is just one example.

Another is the way the president drives home the point with regional leaders. Late last month, for example, Yudhoyono summoned the provincial governors of Bali, East Java, Jakarta, North Sumatra, South Sulawesi and West Java to the capital to brief him on their respective plans to address traffic congestion.

The president’s latest initiative, however, is far more ambitious. While critics may have their doubts about its chances for success, there is no denying Yudhoyono’s willingness to place his political reputation on the line.

Officially called the Master Plan for the Acceleration and Expansion of Indonesian Economic Growth (MP3EI), the program calls for the creation of six economic corridors or highways, mostly located along coastlines, that would connect the various centers of growth.

Each corridor would develop industrial clusters that focus on the economic activities in which it has a comparative advantage. These corridors are located in Sumatra (particularly the western coastline), which will specialize in agriculture and energy; Java (industry and services); Kalimantan (mining); Sulawesi and North Maluku (agriculture and fisheries); Bali and Nusa Tenggara (tourism and food security); and Papua and Maluku (natural resources).

The aim is to boost the country’s gross domestic product to about $4.5 trillion by 2025. If achieved, such a development would place Indonesia among the world’s 10 largest economies.

By launching the MP3EI at the Jakarta Convention Center late last month in the presence of hundreds of high-ranking officials and business executives, Yudhoyono was underlining two key points. The first was the extent to which efforts have been made to involve a wide range of private and public sector players in the planning process. The second ― and perhaps more important ― point, was the high priority he placed on the program’s implementation.

The president has chaired at least three major conferences with ministers, governors and regional councilors at the presidential palace in Bogor in recent months to discuss details of the MP3EI. The private sector has also been intimately involved.

As a result, Yodhoyono is now so closely linked in the public mind with the economic masterplan that, should key aspects fail to be in place by the time the president’s term ends in 2014, it will be difficult for him and those with whom he is closely associated to avoid the blame.

Indeed, there have already been complaints. Some critics have pointed out that the MP3EI neglects the least developed parts of the country, prioritizing instead those areas that are already relatively well developed. Inevitably, this has led to political compromises, such as the inclusion of Aceh in the Sumatra corridor, which do not necessarily make sense economically. Questions have also been asked about how the geographic focus of the masterplan will fit with the sectoral priorities established in 2009 that are currently being monitored by the UKP4.

Yet others see the plan as little more than central planning under another name, and fear the huge bureaucratic machinery that may be created in order to ensure its implementation.

With the total bill estimated at $468 billion, financing is certainly a problem. The government has said it can provide only 30 percent of the required investment, with the remainder to be covered by the private sector. Private sector involvement, however, will depend crucially on the the success of current efforts to eliminate corruption, red tape and regulatory inconsistencies.

The government has established a consultative forum or oversight committee chaired by the president and run on a daily basis by Coordinating Minister of the Economy Hatta Rajasa. It consists of ministers, business representatives and other stakeholders. Its job will be to address the inevitable coordination problems between Jakarta and the numerous provincial and local administrations involved.

Presumably, the UKP4 will also have some role to play, possibly in monitoring the necessary regulatory changes. Indeed, the UKP4 could prove invaluable in helping to secure the cooperation of local authorities (as well as ministries outside the purview of the coordinating minister) by highlighting areas where they may be obstructing key projects.

Ultimately, however, it will be up to President Yudhoyono to ensure that matters run smoothly. It is, after all, his political reputation that is at stake.

By Bruce Gale

(The Straits Times)

(Asia News Network)
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