Development of Infastructure for People Prosperity

In publication of the Indonesian Economic Report (LPI) 2017, Bank Indonesia stated that Indonesian economic recovery continues gradually. A firm global economic growth, both in developed and developing countries which are Indonesian main trading partners, along with the rising of commodity prices were led a substantial increase in export performance, particularly in commodity-based export. 

Furthermore, an increase in export and fiscal stimulus through gradual spending in infrastructures development were increased the corporate's investment confidence. Corporate were beginning to increase their investment rate, particularly in the second semester of 2017, along with the diminished of consolidation phase. Such positive circumstances in both export and investment sector relatively had significant contribution towards the increase of Indonesian economic growth in 2017, as it recorded at 5.07%, while in fact better than it achievement at 5.03% in 2016.

From the above LPI 2017's review, it appears that infrastructure spending has a significant contribution towards Indonesian economic growth. The LPI 2017 hereafter stated that Indonesian economic recovery structure mainly occurred in the Industrial Origin (IO) related to the several sectors, such as export, government investment, and the impact of consumer trend shifting. 

In terms of government investment sector, several infrastructure projects as an implementation of government investment has managed to drive performance of the IO in construction field. As recorded in 2017, IO in construction field has experienced growth equal to 6.79%, higher than last year at 5.22%. Most of the said infrastructure projects were private-based projects and projects owned by State-Owned Enterprises (BUMN), either in transportation or electricity sector. 

As per quarter III of 2017, approximately 8 power plant projects with a capacity of 800 MW were recorded to finish their completion, located in several provinces such as Bangka Belitung, Lampung, Riau, West Sumatera, North Sumatera, West Kalimantan and West Nusa Tenggara. The accelerate completion of infrastructure projects can be seen in the completion of approximately 380 km-length toll road construction; far surpass it results in 2016, which only completed half of the said amount.

Considering the abovementioned facts and data provided by Bank Indonesia, allocation of Government budget for infrastructure development sector should be improve while setting its main objective in development of infrastructures that support public economy. 

The use of APBN budget to satisfy the accessibility of infrastructure in Indonesia has a wide range of multiplier effects towards public economy. Construction of roads, bridges, dams, harbors, power plants and any other kinds of public facilities to support economic activities will have immediate impacts in public productivity, particularly for business sector.

In addition, accessibility of infrastructures has economical function and effective to reduce many variables of production costs, including freight and logistic costs. Improvement of business sector will provide an improvement of its output (both quality and quantity) which at the very last would encourage economic growth. 

A research report conducted by Progressive Policy Institute which was published in March 2014: "Infrastructure Investment and Economic Growth: Surveying New Post-Crisis Evidence" stated that newly found evidences indicated spending on infrastructures development has wide range of multiplier effects and also has a positive effect towards economy. In fact, every spending of USD1 for development of transportation infrastructures can produces economic growth equal to USD1.5 -- USD2.

Accessibility of infrastructures is trusted to have a positive impact for the improvement of people prosperity. IMF Working Paper in February 2015: "The Welfare Multiplier of Public Infrastructure Investment" stated that every spending of USD1 for the investment on public infrastructure can produce an improvement of people prosperity equal to USD0.8 of private consumption.

Considering the above data and research, it is appropriate for the Government to provide special attention yet sustainable investment towards infrastructure development.