by Sebastien GOULARD
In March 2024, the Indonesian government announced the launch of 14 new strategic projects to accelerate the country’s development. These projects are spread across the entire Indonesian territory to promote regional development dynamics. This strategy is also multi-sectoral, with projects planned in energy, tourism, industry, and healthcare.
The 14 National Strategic Projects
One of the priorities of this development plan is infrastructure, which is expected to facilitate exchanges between the islands of the Indonesian archipelago and redirect investments to areas designated as priorities by Jakarta. However, as stated by the spokesperson for the Coordinating Ministry for Economic Affairs, Haryo Limanseto, this programme is not limited to physical infrastructure; the education and food sectors are also expected to benefit from this national strategy.
The “North Hub” offshore development project off the coast of East Kalimantan, in which Italian company ENI is expected to invest, is on the list, along with several industrial parks on Galang Island and Sulawesi Island. Tourism projects, green cities, and toll roads are also on the agenda.
In addition to this list of 14 projects, the Coordinating Ministry for Economic Affairs added in May 2024 two more programmes: one concerning the deployment of an automatic toll payment system and the other the integration of two regional airport operators into the national holding company InJourney. The 14 announced projects are expected to be completed by 2029.
Resort to Private Investment
A novel aspect of this strategy is that the Indonesian government is relying on private investors, rather than public funds, to develop these projects. Investors participating in these projects benefit from corporate income tax reductions of up to 100% for 30 years for the most ambitious projects, as well as support from national and local authorities regarding land and license acquisition. The goal is to facilitate and accelerate the deployment of these projects.
Since 2016, nearly 196 national strategic projects (NSPs) have been carried out in Indonesia to achieve a better balance of economic and industrial projects across the country. This is a flagship programme of President Jokowi, in office since 2014, aiming to attract private investors, both Indonesian and foreign alike, for the country’s development without relying on foreign financing. This approach contrasts with the construction of the high-speed train line between Jakarta and Bandung, for which nearly $5 billion was borrowed from the China Development Bank.
The Need for Local Population Support
The implementation of these projects may require the expropriation of certain residents, for example, in Rempang for the construction of an ecocity. Therefore, the realization of NSPs can take time due to appeals filed by local populations, although these remain limited. It is necessary to consider the impact of NSPs on local communities and create new opportunities for those who would lose their jobs due to the construction of new infrastructure.
This is why it is essential that the implementation of national strategic projects be accompanied by measures allowing local residents to also benefit from this development strategy, particularly through new training programmes. Some observers argue that financial compensation is not sufficient to mitigate the impact of these projects on residents.
A Significant Need for Infrastructure
Indonesia is currently the world’s most populous archipelago, with nearly 280 million inhabitants spread over approximately 17,000 islands. But, the island of Java is home to about 57% of the total population, and its cities, particularly the capital Jakarta, face congestion issues. On the island, the priority is to develop new infrastructure to facilitate the integration of cities near Jakarta and to develop cleaner industries to reduce air pollution.
Throughout the rest of the archipelago, the Indonesian government needs to build necessary infrastructure to reverse internal migration flows. Young people, especially the most educated, must be able to stay on islands other than Java. In Borneo, the country’s new administrative capital is expected to be inaugurated at the end of this summer. Nusantara will thus replace Jakarta. This means that new infrastructure is anticipated in this part of the country. The government must continue to convince local and foreign investors to invest in this new city and consider possible new incentives for the private sector.
Across all islands, other than Java and Borneo, President Jokowi’s government is working on connectivity projects to better link cities to each other and take better advantage of Indonesia’s abundant resources. The 14 national strategic projects announced in spring 2024 illustrate this strategy of decentralizing the productive apparatus from Java to the entire archipelago and upgrading Indonesia’s industry. The success of these projects will allow Indonesia to confirm its position as a major destination for foreign investors in Southeast Asia.
Author: Dr. Sebastien Goulard is the founder and editor-in-chief of Global Connectivities.
