The Indonesian government wants to enlarge the role of foreign participation in the country's infrastructure development. Through a proposed revision of Presidential Regulation No 36/2010 regarding the Negative Investment List (Daftar Negatif Investasi), foreign investors will have more room for investing in Indonesia's infrastructure sector within public-private partnership schemes (PPP projects). The Indonesian government needs more foreign participation as the current state of the country's infrastructure is inadequate.

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On Sunday (15/12), Indonesia Investments released the latest edition of its newsletter. Our weekly newsletter contains the most important news stories on the subject of Indonesia's economy, politics and social issues that were reported in the last seven days. This week's edition includes analyses of Indonesia's benchmark interest rate, current account deficit and geothermal energy development. Visit our Join Us section if you want to sign up for our free newsletter. Our latest newsletter can be viewed here.

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The Ministry of National Development Planning (Bappenas) estimates that between 2015 and 2020 the country needs IDR 7.200 trillion (USD $600 billion) for investments in infrastructure. However, the central government can only supply about 25 percent of the needed investments. These figures are the preliminary results of a study conducted by Bappenas. The study, which focuses on Indonesia's infrastructure development in the period 2015 to 2020, is expected to be completed by March 2014.

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An improving economic growth outlook in both Japan and the USA paired with stronger-than- expected growth in the People’s Republic of China (PRC) support a steady growth outlook for developing Asia, says a new Asian Development Bank (ADB) report. The Asian Development Outlook Supplement, released on Wednesday (11/12), forecasts growth of 6.0 percent in 2013 for ADB’s 45 developing member countries, improving to 6.2 percent in 2014. The forecasts are unchanged from the Asian Development Outlook Update issued in October.

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Indonesia's Ministry of Transportation expects the number of air passengers in Indonesia to exceed 100 million in 2014, a 15 percent growth from this year's estimated 90 million air passengers. Air traffic in Southeast Asia's largest economy is growing rapidly. From 2012 to 2013, passenger numbers grew at least 19 percent (from 60 to 90 million), while the total number of flights increased from 566,000 in 2011 to 684,000 in 2012. This robust growth necessitates investments to safeguard comfort and safety in Indonesia's aviation sector.

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According to the Deputy Minister of Transportation Bambang Susantono, the construction of the Trans-Java railroad is well on its way and might be fully operational from the first quarter of 2014. The Trans-Java railroad is a 727-kilometer double-track railroad that connects Jakarta and Surabaya, Indonesia's two largest cities. Most of the railroad, which costs the government IDR 9.8 trillion (USD $852.2 million), will be ready for use before New Year but there are still a few plots of land that the government needs to acquire.

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After experiencing slowing growth in recent months, Indonesian cement sales in October 2013 increased 7.9 percent (year-on-year) to 5.58 million metric tons according to data from the Indonesia Cement Association (ASI). As such, cement sales rebounded from the 5.3 percent growth (yoy) in the previous month. The October growth rate was mainly caused by increased cement demand from islands other than Java. In particular, demand from Sumatra rose significantly. Indonesia's second most populous island bought 1.15 million tons of cement.

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Two Indonesian government departments - the Ministry of National Development Planning and the Ministry of Economy - have selected 27 infrastructure projects that will be offered to the private sector in 2014. These 27 projects are considered top priority projects and will be offered during the International Indonesian Infrastructure Conference and Exhibition in the form of public-private partnerships (PPPs) with the Indonesian government. The total value of these projects combined is estimated at USD $47.5 billion.

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On Friday (25/10), the World Bank released its 'Doing Business 2014' report in which it "ranks countries on their overall 'ease of doing business', and analyzes reforms to business regulation - identifying which economies are strengthening their business environment the most." In total 189 countries were analyzed. Indonesia, traditionally characterized by a complex and difficult investment environment, managed to climb 8 places in the ranking. Southeast Asia’s largest economy rose from number 128 to 120 in the 2014 edition.

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The government of Indonesia invites foreign and domestic investors to invest in the country's small islands and coastal areas in order to make these locations more attractive for tourism and other sectors. Facilities and infrastructure in these areas as well as transportation to and around these areas should be improved. Therefore, the government - through its Team for the Acceleration of Investment in Small Islands within the Ministry of Fishery and Maritime - is eager to make the investment climate more attractive. Currently, it sees three bottlenecks.

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The Finance Ministry of Indonesia announced that it plans to inject USD 1.63 billion into state-owned financing company Sarana Multi Infrastruktur and to transform this company into an infrastructure bank in a move to boost infrastructure development across Southeast Asia’s largest economy. The central government needs private capital to fund its massive infrastructure program for the next five years as it can only account for 30 percent of required investment. For the remainder it relies on private capital and state-owned enterprises.

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In his presentation at the Indonesia Investment Summit 2015, organized in Jakarta on 15-16 January, Standard Chartered Bank Senior Economist Fauzi Ichsan said that despite the challenges amid global uncertain times, there remains plenty room and opportunity for Indonesia to grow robustly on the long-term. In fact, by 2030 Ichsan believes that Indonesia will be among the world's top ten countries in terms of largest economies. For investors it is important to understand the challenges and key pillars of economic growth.

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Takehiko Nakao, President of the Asian Development Bank (ADB), estimates that the Indonesian economy will grow 5.6 percent year-on-year (y/y) in 2015, lower than the target that has been set by the Indonesian government in the 2015 State Budget (5.8 percent y/y). Nakao is slightly less optimistic as he expects a slowdown in government spending this year. On a positive note, Nakao’s forecast implies a sharp improvement in Indonesia’s economic growth in 2015 from an estimated 5.1 percentage point (y/y) GDP growth in 2014.

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The Indonesian government changed the funding scheme for the construction of the Soekarno-Hatta International Airport Railway project (which will connect Soekarno Hatta International Airport, located nearby Jakarta, and Halim Airport in Jakarta). Previously, it was planned that this project, valued at IDR 26 trillion (USD $2.1 billion), would be offered through a public-private partnership (PPP) construction in which the Indonesian government would finance 55 percent of the costs. Now, however, the project is offered fully to the private sector.

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The Governor of Indonesia’s central bank, Agus Martowardojo, said that he expects inflation to accelerate to 6.1 percent year-on-year (y/y) in November 2014, significantly up from 4.83 percent y/y in the previous month. Accelerated inflation is caused by the multiplier effect triggered by the recent subsidized fuel price hike in Southeast Asia’s largest economy. On 18 November 2014, the government introduced higher prices for subsidized fuels in a bid to reallocate public spending from fuel consumption to structural development.

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Last week, Indonesian President Joko Widodo introduced higher subsidized fuel prices in Southeast Asia’s largest economy in a bid to shift generous public spending from fuel consumption to productive and structural economic and social development. Prices of subsidized low-octane gasoline (premium) and diesel (solar) were raised by over 30 percent, or IDR 2,000 (USD $0.17) per liter, starting from 00:00 on Tuesday (18/11). Widodo aims to reallocate these funds to infrastructure, social welfare and the maritime sector.

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A total of 35 American companies are interested to invest a combined USD $61 billion in Indonesia over the next five years according to a survey conducted by the Paramadina Public Policy Institute, the American Chamber of Commerce in Indonesia (AmCham Indonesia), the Indonesian Employers Association (Apindo), and the Indonesian Chamber of Commerce and Industry (Kadin Indonesia). These 35 US companies have already invested a total of USD $65 billion in Indonesia over the period 2004 to 2012.

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The number of air passengers in Indonesia will most likely fail to meet its growth target in 2014. Based on government data, the number of air passengers in Southeast Asia’s largest economy reached 47.5 million in the first eight months of 2014, a 5.82 percentage point growth from the same period last year. However, the Indonesia National Air Carrier Association (INACA) initially targeted annual passenger growth in the range of 12-15 percent for 2014. Amid slowing economic growth, people’s purchasing power has declined.

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Investment in Indonesia’s processed food and beverage industry is expected to grow at least ten percent to IDR 55 trillion (USD $4.6 billion) in 2015 from an estimated investment realization of IDR 50 trillion in 2014. Adhi Lukman, General Chairman of the Indonesian Food and Beverage Association (GAPMMI), said that investments in this sector have been solid due to rising consumption of food and beverages in Southeast Asia’s largest economy. Particularly foreign investments have been strong in 2014 and are expected to continue next year.

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Today (20/10), Central Jakarta seems to have changed into one big party as Joko Widodo was inaugurated as Indonesia’s seventh president earlier this morning. For the remainder of the day celebrations will be held at Monas (National Monument) and surrounding areas. However, it is of vital importance that Widodo (popularly known as Jokowi) will start to focus on this presidential duties tomorrow as the country is facing a number of economic challenges. What are these challenges?

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