Indonesia's planning ministry targets up to 6% GDP growth in next 5 yrs

Indonesia's planning ministry targets up to 6% GDP growth in next 5 yrs

skyline Jakarta Indonesia
The skyline of Indonesia's capital Jakarta. (Photo: AFP/Romeo Gacad)

JAKARTA: Indonesia could lift its pace of economic growth to an average of 6 per cent annually during President Joko Widodo's second term in office, if it can attract more investment under the best-case scenario put forward by the country's planning ministry.

Widodo is due to approve the proposal, which was made public on Wednesday (Jul 24) in a consultation forum with regional governments, when he starts his next five-year term on Oct 20.

The planning ministry presented three scenarios in growth forecasts up until 2024, with the most pessimistic seeing average GDP growth of 5.4 per cent a year, a middle scenario of 5.7 per cent and the most optimistic 6 per cent.

READ: Indonesia president pledges more infrastructure, investment in second term

All would represent an acceleration from the roughly 5 per cent growth rate that Southeast Asia's largest economy has been stuck at in the last few years. The economy has been held back by depressed prices of commodities and higher interest rates aimed at discouraging capital outflows.

However, the proposal is still less ambitious than Widodo's first-term document, which forecast average growth of 7 per cent in 2014-2019, a target he failed to reach.

The new forecast assumes Indonesia will attract total direct investment of between 36,595.6 trillion rupiah to 37,447.6 trillion rupiah (US$2.62 trillion to US$2.68 trillion) in the next five years, or 6.9 per cent to 8.1 per cent investment growth per year.

Widodo's administration is seen providing up to 13.8 per cent of the investment and state companies up to 7.9 per cent.

The proposal also targets a total of 6,421 trillion rupiah infrastructure investment, or around 6 per cent of GDP, between 2020 to 2024 under the middle growth rate scenario.

"However, our supply capacity is estimated at only 3.46 per cent of GDP, so there is a significant gap in infrastructure financing," according to the document, which says alternative funding methods such as public-private partnership would be needed.

According to the planning ministry, the government will focus on investment in basic infrastructure, such as piped water, access to electricity and building information technology infrastructure to boost broadband and cellular Internet speeds.

READ: Indonesia to start building 7km bridge linking Bintan and Batam in 2020 

Other projects include a high-speed railway from Jakarta to the Central Java city of Semarang, as well as the completion of the Jakarta-Bandung high-speed track, a US$6 billion project being build as part of China's Belt and Road Initiative that is due to start operations in 2021.

The total infrastructure investment already takes account of a recently approved plan to move the country's capital from Jakarta on the main island of Java to Borneo island.

The planning ministry has previously said Widodo's plan to move out of Jakarta may require investment of up to US$33 billion. If everything went to plan, the first stage of relocation will take place at the end of Widodo's term in 2024, Minister Bambang Brodjonegoro has said. 

Source: Reuters/gs

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