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The Path to Greatness: Indonesia’s Master Plan for Economic Advancement and Expansion

Indonesia’s quest to become one of the world’s top ten economies by 2025 aims beyond any categorization of mere national projection, as her detailed blueprint reveals. 
Published: 2013

Although nations are always habitually planning for their future, the coming fifteen years for Indonesia are poised to chronicle one of its most defining eras. The South East Asia’s economic power- house has been steadily vaulting over countless economic indices in amazing strides of growth and development. The entire world, already mindful of Indonesia’s enviable progress, has officially been put on notice as to its ultimate ambitions by the year 2025.

Here is a country that offers breathtaking prospects from any perspective of theoretical and practical economic analysis. If population counts for anything, as is evident in China’s case, then Indonesia’s 240 million is by no measure a mean figure. Such figures, in today’s world of consumerism and economic dominance, are hardly neglected in most spheres of critical decision making because of their real or perceived weight of influence. Then there is the incontrovertible advantage that abundance in natural resources does introduce, if a country is so fortunate. Indonesia, with the foregoing factors amongst its many advantages, has boldly traced out a path to attain its national goal of an advanced economy by a Masterplan for Acceleration and Expansion of Indonesia’s Economic Development (MP3EI) from 2011 to 2025. And it refuses to be taken lightly.

Indonesia’s current ranking as the world’s 17th largest economy was furrowed on modest beginnings as an agro-based economy, imaginably distant from technological and industrial contributions. By the year 1980, its Human Development Index (HDI) only pushed the needle to about 0.39. Myopic experts perceived its countless assets, including its growing population, as hindrances erroneously underestimating its developmental potential. However, by the year 2010, it showed a healthy HDI reading of over .60 and a per capita income of more than $3,000 USD. Indonesia proved its economic mettle by astutely navigating the financial economic crisis of the 1980’s to emerge with a significantly improved debt rating, which consequently set international economic agencies off in unison of praise. In the face of stiff challenges, the South East Asian nation has excelled with its Gross Domestic Product reaching a current value of over $700 billion USD. Glaringly, it is a consistency to recognise and transform economic and developmental potentials into envisioned realities that Indonesians have demonstrated over the stretch of the past sixty years. And the will to achieve, as a national attribute, is profoundly evident in their prevailing sense of discipline and competitive spirit. Furthermore, they already harbour a conviction born from the antecedents of accomplishing set goals, an attribute every ambitious nation ought to possess, and should generously assure Indonesia of the ‘certainty’ of achievement for the commendable MP3EI.

Guided by a leadership with a purpose and vision to translate the country’s potentials into a reality of global economic advancement and competitive relevance, its people can trust in the presidency of His Excellency, Dr. H. Susilo Bambang Yudhoyono, whose determination is expressed in the national theme of “Indonesia Can” launched in 2008. The current government’s disposition towards consistency in planning and management can be directly discerned in the economic Masterplan’s aims to catalyse the objectives of the already existing Long Term Development Plan of 2005 to 2025, which in turn complement the Mid Term Development Plan of 2011 to 2015. A self sufficient, advanced, just and prosperous Indonesia by the year 2025 may appear as a target that all of the country’s past and present performances optimistically attests to as a distinct reality, but as can be expected Indonesia’s Masterplan is conceived to be robust and thorough to literally guarantee its success of implementation.

Indonesia’s fifteen year transformation into an advanced economy is enshrined in a concise and achievable blueprint.

Assets, Potentials & Challenges
The MP3EI is essentially a directive by which Indonesia intends to shuttle its Human Development Index into that of a top ten economy equivalent by an implementation strategy that relies on three main elements: the increase of value adding and value expansion capabilities to Indonesia’s industrial production processes, achieving high competitiveness for Indonesia’s production output by encouraging efficiency and effective marketing strategies in order to gain more global market share, and a concerted push for innovation and breakthroughs across the industrial production spectrum to realise and sustain a competitive, innovation-driven economy. But the government has also been very candid about the magnitude of challenges that inevitably lie in the paths to success. President Yudhoyono’s inputs and expertise were extensive and exhaustive. The results of that effort are evident in the Masterplan which has extremely defined goals and milestones easily interpreted to determine necessary individual contributions.

In figures, the MP3EI sets a GDP target of at least $4 – $4.5 trillion USD and a minimum per capita income of $14,250–$15,500 USD by the year 2025. The economic growth rate of 6.4% – 7.5% will have to be maintained in the period from the year 2011 to 2014 as inflation rate is throttled down below 6.5%. These goals take into account Indonesia’s position in the dynamics of regional and global economics, especially as a hub for the expanding East Asia market dominated by China, India and the ASEAN bloc, a region that has witnessed unparalleled economic growth for the past twenty years.

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Indonesia’s human asset (a population that is the fourth largest in the world) is also considered to contribute a significant role because of favourable projections showing its increasing productive workforce to reach its highest mark for all of East Asia between 2020 and 2030. This particular probability, in tandem with an imoproved education among Indonesia’s population, will deliver exponential increase in economic productivity. The wealth of natural resources in Indonesia will play a vital role in meeting the objectives of the MP3EI. Its position amongst world’s largest producers of natural resources such as palm oil, cocoa, tin, nickel, oil and gas and marine produce present a formidable launchpad for the Masterplan. Moreover, there are the advantages of Indonesia’s geographical location, one of which is its prime access to the world’s largest market through the Malacca Straits; among the world’s busiest Sea Lane of Communication (SLOC).

Notably, the Masterplan is also diligent in recognising the challenges to its success. For example it stresses a thrust into economic industrialisation that is pivoted on value addition and value creation– a feature that is currently lacking. Another challenge is the substantial gap in economic development between the western and eastern parts of the country, a disparity the Masterplan aims to redress. Infrastructural development in itself is a major issue, considering Indonesia’s archipelago geography, stretching over 5,200 km and spans a width of about 1,870 km. Indeed it is a multi-faceted challenge encompassing most of its transportation, logistics and connectivity needs, and commands a commensurate priority as the challenge to grow the percentage of the Indonesia workforce with an educational diploma from its current 8% to well beyond 50%. The rapid urbanisation of Indonesia, which already poses its own challenges for 53% of the country’s population, is projected to affect 65% of the populace by the year 2025. A direct redress for its current and envisaged inconveniences are embedded into the Masterplan, since urbanisation affects migration, employment and other social and economic provisions. Add to the foregoing concerns from climatic conditions and effects of global warming, temperature changes and high variations in rainfall to sum up the challenges which must be navigated by Indonesia in pushing into reality all that is promised by the Masterplan in 2025. But the readiness and zest which the country has mustered to overcome these challenges is reflected in its adoption of a new mentality that advocates a sense of operating with new mind set; in plain-speak Indonesia has decided that it would no longer function in the ‘business as usual’ mode. So regulatory and administrative functions at all levels of government must interrelate and collaborate to maximally serve public and private organisations, businesses, investors and facilitators towards meeting the goals of advancing and expanding economic development as contained in the MP3EI. This thinking, riding on the pervading perception for advancement, will augment and harmonise the various roles necessary for the implementation of the MP3EI directives.

The Masterplan
For Indonesia presently, 8/22 is more than a mere mathematical representation, and that is because it also serves as an apt embodiment of the basis of the Master Plan for the Advancement and Expansion of Economic Development. In this case, the numerator in the fraction correlates with the number of sectors in focus for development, and the denominator represents in number the main economic activities to be engaged. These 8 sectors are classified into agriculture, mining, energy, industrial, marine, tourism, telecommunications, and strategic areas of development. Within them, the 22 economic activities are to be developed as well. Devised as direct components for servicing the 8/22 core of the Masterplan are three key elements of Economic Corridors Development, National Connectivity Development, and the development of both Human Resources and Science and Technology Capabilities. These components, in turn, are to be propelled by three vibrant initiatives. These initiatives will focus on: encouraging large scale investment in the twenty-two economic activities, synchronising of the various national action plans to ensure optimum performance that delivers the projected results and developing centres of excellence in all of the economic corridors. Most of Indonesia’s goals towards becoming one of the ten leading economies by 2025 are surmised in the foregoing approach. But it is in the elaboration of the various segments that the whole concept converges into clarity.

With defined principles and prerequisites as drivers, Indonesia’s Masterplan specifies six regional economic corridors for development, with each of the corridors serving as focus for different industry sectors. Investors and businesses with interests in natural resources can readily converge on the Sumatra Economic Corridor as the designated Centre for Production and Processing of Natural Resources and Energy Reserves. Consisting of 11 economic centres namely Banda Aceh, Medan, Pekanbaru, Jambi, Palembang, Tanjungpinang, Pangkai Pinang, Padang, Bandar Lampung, Bengkulu and Serang its main economic development thrust focuses on palm oil, rubber, coal, shipping, steel and the Sunda Straits National Strategic Area.

The Java Economic Corridor is at the forefront in efforts for Industry and Services provision with its five economic centres of Jakarta, Bandung, Semarang, Yogyakarta and Surabaya. Its main economic activities are food and beverages, textile, transportation equipment, shipping, ICT, defence equipment and Greater Jakarta Area. Finally, the Papua – Kepulauan Maluku Economic Corridor is the pivot for economic activities pertaining to the development of Food, Fisheries, Energy and National Mining. It has seven economic centres namely Sofifi, Ambon, Sorong, Manokwari, Timika, Jayapura and Merauke with economic activities concentrating on food agriculture, copper, nickel, oil and gas, and fishery.

The development of these economic corridors is to be achieved through the agencies of Special Economic Zones (SEZ) and Industrial Clusters, as complementary developmental vehicles that support regional economic growth.

Theme-of-The-Six-Economic-Corridors-in-Indonesia

To develop these economic growth centres into sectors that ably contribute to Indonesia’s projected $4 – 4.5 trillion USD GDP by 2025, requires a supporting infrastructural framework to cater transportation, logistics and communications needs that will necessarily arise. That is what the National Connectivity Policies, under the MP3EI, are drawn to accommodate. Segmented into four elements, the national connectivity strengthening regimes are designated as National Logistic System, National Transportation System, Regional Development System, and Information and Communication Technology (ICT). Each of these will be developed to meet the national connectivity strengthening objectives of connecting the centres of economic growth. The foregoing is to be achieved based on intermodal supply chain systems, improving accessibility to Indonesia’s hinterland, and provision quality connectivity to underdeveloped and isolated areas; equitable economic development and quickened rate of development should prove to be direct consequences. It is their combination within the supervision of the MP3EI implementation that will harmonise their developments to engender the realisation of a seamless interplay among the three elements of physical connectivity, institutional connectivity and people-to-people connectivity. All aspects of infrastructural development pertaining to intra-economic corridor connectivity, inter-economic corridor connectivity and international trade and communications logistics will fall under the aegis of the national connectivity development. Its scope is broad and wide- ranging to include building and improvement of roads (new as well as existing), rail transport infrastructures and radio frequency spectrum allocation. Even the utilisation of green technologies to support electricity provision in non-commercial areas, acquisition of robust telecommunications backbone, and the opening of new international gateways to foreign nations are all included. Its summation into a theme of ‘Locally Connected, Globally Integrated’ acutely defines its aims to all aspiring stakeholders.

Indonesia’s economic Master Plan is concise and specific in outlining its implementation criteria.

The third essential requirement for Indonesia’s advancement and expansion in economic development is the impact of human resource input through knowledge and technological values. Quality education is singled as the main route to developing the optimal human capital that is necessary for the actualisation of the MP3EI ideals. The competitive edge and innovative advantages to be ingrained in Indonesia’s goods and services will be cultured through educational programs tailored to maximise the productivity input of the workforce. Thus, for instance, vocational learning programs are structured to teach specific skill sets at high standards that also accommodate flexibility in application in order to fully serve the economic corridors. The traditional academic system is devised to focus fields of specialisation on direct economic development potentials of the economic corridors. University research centres are to serve as founts of innovations and function on the principles of integration, resource sharing and maximal information technology utilisation. Polytechnics and universities form the bridges between the upper tier research centres and lower level high schools and vocational colleges that precede community colleges. Advancement in science and technology, which is a direct consequence of quality education, is also stipulated by the Masterplan as a necessity to transform Indonesia from a natural resources-based economy into an industry and innovation driven one by 2025. It advocates increased productivity and competitive advantages by a credible transition in human resource capacity from a labour intensive state into human capital intensive state. This is a principle enshrined in the presidential innovation initiative known as the 1-747 initiative, which states that Research & Development fund amounting to 1% of annual GDP supports a 7-step innovation system and 4 modes of economic growth acceleration in a process that outputs the 7 objectives of Indonesia’s vision 2025.

Implementation and Governance
A plan or strategy depends critically on conducive implementation for success, and Indonesia will accordingly erect a robust set up, to be established under a Presidential Decree, for governing MP3EI’s execution. Although a national initiative, the MP3EI will assign functional roles to regional and local authorities in order to ensure maximal coordination economic development at various levels. A three-phase implementation that is both gradual and continuous, will be supervised by the MP3EI implementation committee to be chaired by the president. The first phase of implementation, also known as Phase 1, commences from 2011 to 2015 with a primary focus on entrenching the composition and operations of the implementation committee, preparing action plans for bureaucratic realignment, attracting investment commitments, establishing international hubs for logistics and transportation, strengthening R&D in the economic corridors and developing human resources. After the ‘Quick-wins’ runs of phase 1, the span from 2016 to 2020 is the dominance of Phase 2. It aims to accelerate the development of long-term infrastructure projects, empower innovation and competitiveness of the main economic activities, ingrain economic governance and foster industrial development with value creation emphasis. Essentially, this second phase is designed to solidify investments and overall economic development. Finally, Phase 3, which stretches from 2021 to 2025, is chiefly to oversee the fine tuning of Indonesia’s industrial capabilities for global competitiveness and high technology adaptation towards sustainable future growth.

A detailed implementation profile for these phases designates tasks and responsibilities, and assigns them to individuals, authorities or stakeholders for execution under specified schedules and delivery timetables. As a necessity, there is an evaluation and monitoring system to ensure overall effectiveness and flexibility in response and decision-making. This recognition for meticulous management of the implementation regime instigated a proviso for structuring the implementation committee into three bodies known as the Implementation Team, the Working Team and the Secretariat. Essentially, the Implementation Team wields among its responsibilities the approval of strategic decisions, resolution of strategic issues and general guidance provision. Its membership will be constituted by ministers, chairpersons of non-ministerial institutions and representatives from agencies concerned with MP3EI implementation. As for the Working Team, its roles consist primarily of coordinating the implementation of investment and infrastructural projects. Key officials from relevant official departments will form its membership. The Secretariat will function to develop monitoring and coordinating systems that gauge the progress of MP3EI implementation. Staffed by experts it supports the Implementation and Working teams with clear analysis and technical proposals for overcoming hitches occurring from daily monitoring.

As the definitive ambition of a motivated nation, the Masterplan’s embodiment of visionary perception, methodical planning and sure-footed execution is befitting tribute to Indonesia’s recognition of its true place in global relevance.

Quantum-of-Estimated-Investments-in-Each-Corridor

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