In the latest edition of the World Economic Forum global competitiveness index (GCI, 2013-2014), Indonesia ranks 61st out of 148 economies when it comes to the state of the country's infrastructure. The positive news is that Indonesia jumped 17 places from the GCI, 2012-2013 edition due to increased government planning and spending on infrastructure projects, but the negative news is that there is still much progress to be made. It is a sad fact that infrastructure development has been lacking in Southeast Asia's largest economy because if the country would possess decent infrastructure, the GDP growth rate could accelerate to 8 percent instead of 6 percent. In light of much-needed job creation and poverty eradication, this would be a good development.

The main problems that hinder infrastructure development in Indonesia are the lack of financial resources, land acquisition, bureaucracy, and a weak regulatory environment (including weak legal certainty).

Regarding the lack of financial resources, the Indonesian government intends to enhance cooperation with the private sector to overcome this issue. Through public-private partnerships (PPPs) within the Masterplan for the Acceleration and Expansion of Indonesia's Economic Development (MP3EI), it aims to develop the country's infrastructure. The MP3EI was launched in 2011 but has not resulted in many successful PPP projects yet. For the private sector infrastructure projects are usually not attractive as it entails large investments while it can take many years before investors see profits. Particularly in a riskier environment (weak legal certainty), such as Indonesia, investors will think twice before participating in such projects.

Nonetheless, the Indonesian government offers 27 infrastructure projects (with a total value of USD $47.3 billion) to the private sector. Groundbreaking of these project is hoped to be conducted in 2014.

Infrastructure Projects Offered to Private Sector:

Project Name   Estimated Investment
Railroad Soekarno-Hatta Airport       USD $2.57 billion
Integrated Railroad Gedebage Bandung Terminal       USD $133 million
Revitalization Train Station Yogyakarta & Pedestrian Path Malioboro       USD $1.6 billion
Development Aceh City       USD $1.6 million
Sunda Strait Bridge & Strategic Areas       USD $25 billion
Toll Road Manado Bitung       USD $353 million
Toll Access Tanjung Priok Harbour       USD $612.5 million
Toll Road Balikpapan-Samarinda       USD $1.2 billion
Toll Road Kayu Agung-Palembang-Belitung       USD $836 million 
Drinking Water Infrastructure Pondok Gede       USD $20 million
Drinking Water Infrastructure South Bali       USD $218 million
Waste Processing Depok and Bogor       USD $40 million
Waste Processing Surakarta        USD $30 million
Hydropower Karama South Sulawesi       USD $1.3 billion
International Harbour Maloy East Kalimantan       USD $1.7 billion
Expansion Tanjung Priok Harbour, Cilamaya, Karawang       USD $1.1 billion
Expansion Harbour Tanjung Sauh, Batam       USD $805.8 million
Bali Airport Development       USD $510 million
International Airport Kulon Progo       USD $500 million
Mining Railroad Baai island-Muara Enim       USD $3 billion
Monorail South Sumatra       USD $550 million
MRT Surabaya       USD $1.1 billion
Monorail Bandung       USD $2.8 billion
Toll Road Cisumdawu (West Java)       USD $1 billion
Toll Road Pasir Koja-Soreang Bandung       USD $210 million
Toll Road Pandaan-Malang       USD $420 million
Sewage Treatment Jakarta       USD $173.5 million
Total       USD $47.3 billion

Source: Investor Daily