Implementing Indonesia s Economic Master Plan (MP3EI): Challenges, Limitations and Corridor Specific Differences

Transcription

1 Implementing Indonesia s Economic Master Plan (MP3EI): Challenges, Limitations and Corridor Specific Differences June 2012 Prepared by Strategic Asia Page 1 of 87

2 Table of Contents The Concept of an Economic Corridor Economic Corridors in Indonesia Implementation Phases of the MP3EI Barriers to Implementing the MP3EI Public Communication and Awareness Synergy with the RPJP and the RPJM Regulatory Reform Institutional Reform Infrastructure Regional Disparities Human Resource Development Financing and Attracting Private Sector Investment Environmental Sustainability Differing Perceived Opportunities and Barriers to Implementing the MP3EI at the National Level and in the Kalimantan and Bali- Nusa Tenggara Corridors Implementation Requirements and Recommendations for the MP3EI International Experience of Implementing Economic Corridors A Closer Look on East-West Economic Corridor of Greater Mekong Sub-region (GMS): Turning Infrastructure Corridors into Economic Corridors The Indonesia-Malaysia-Thailand Growth Triangle Roles of Stakeholders in the Implementation of the MP3EI Current Structure of the KP3EI Level of Preparedness Sequencing Recommendations for the Implementation of the MP3EI at the National Level Implementation Recommendations in the Kalimantan Corridor Implementation Recommendations for the Bali- Nusa Tenggara Corridor Conclusions REFERENCES ANNEX Page 2 of 87

3 Figures Figure 1 - MP3EI Economic Corridor Map Figure 2 - Estimated Investment Required for the Main Economic Activities of the MP3EI Figure 3 - Implementation Phases of MP3EI Figure 4 - Barriers to Implementing MP3EI Figure 5 - Infrastructure Projects Under Construction Figure 6 - Total Projects and Total Investments in the MP3EI Figure 7 - Regional Inequality in Indonesia Figure 8 - Indications of Investment in 6 Economic Corridors Figure 9 - Factors for Doing Business in Indonesia Figure 10 - Perceived Opportunities at the National Level Figure 11 - Perceived Barriers to Implementation at the National Level Figure 12 - Perceived Opportunities in the Kalimantan Corridor Figure 13 - Perceived Barriers to Implementing the Kalimantan Corridor Figure 14 - Barriers in the Kalimantan Corridor broken down by frequency of mention: Figure 15 - Perceived Opportunities in the Bali- Nusa Tenggara Corridor Figure 16 - Perceived Barriers to Implementing the Bali- Nusa Tenggara Corridor Figure 17 - Barriers in the Bali- Nusa Tenggara Corridor broken down by frequency of mention: Figure 18 - EWEC Linkages to National Development Plans Table Table 1 - The Economic Activities Promoted by the MP3EI per Corridor Boxes Box 1 - Key Points from the Low Carbon Economy Knowledge Hubs Box 2 : EWEC Flagship Projects Box 3 IMT-GT Five Connectivity Corridors Page 3 of 87

4 Implementing Indonesia s Economic Master Plan (MP3EI): Challenges, Limitations and Corridor Specific Differences 1 Executive Summary The Government of Indonesia announced the Master Plan for the Acceleration and Expansion of Indonesia s Economic Development (MP3EI) in May This has been followed by almost constant debate surrounding the feasibility and the implementation challenges likely to be faced by the MP3EI. The fact that such an overwhelming amount of interest has been generated about the MP3EI shows the willingness of stakeholders to take part in realising the success of the policy. It also demonstrates that not enough attention has been paid to implementation mechanisms and frameworks during the design phase of the MP3EI itself. The MP3EI is a very ambitious plan. It aims to propel Indonesia into the top ten economies and raise per capita from US$3000 to US$15,000 by The policy rests on three main pillars: establishing six economic corridors based on the comparative advantage of the different regions of Indonesia; promoting connectivity within Indonesia and the ASEAN region, as well as improving human resources and science and technology. Implementation of the MP3EI, however, is its Achilles heel. The MP3EI document itself dedicates a relatively short space to map out the implementation and monitoring of the policy. This ambitious policy needs a strong implementation strategy to ensure its success. At the national level, there are nine major barriers to the implementation of the MP3EI: a lack of socialisation and awareness; unclear synergy with the RPJMN (Indonesia s long term development plan); needs for both regulatory and institutional reform; underdeveloped infrastructure; regional disparities; a need for human resource development; a lack of available national financing and disincentives to private investment and a perceived clash with committing to environmental sustainability. Barriers found for the Kalimantan and Bali- Nusa Tenggara Corridors are found to be different, although all stemming from a general theme at the national level. As such, recommendations for the implementation for the two regional corridors are not the same. This indicates that each of the six Corridors will be unique in their implementation strategy. Indeed, the MP3EI states that each corridor has its own theme based on the comparative advantage of that region. Furthermore, implementation relies on a number of factors such as levels of infrastructure, human resources, institutional capacity, amongst others. As such, it is likely that the implementation experiences from one Corridor cannot be copied to another. This suggests then, that the idea of using a pilot corridor should not be undertaken, but instead all six corridors be implemented simultaneously. Implementing the first phase of the MP3EI should 1 The UK Foreign and Commonwealth Office in Jakarta contracted PT. Strategic Asia Indonesia between August 2011 and April 2012 to undertake a project looking at the implementation barriers, requirements and recommendations for the MP3EI. Page 4 of 87

5 occur at the same time as the implementation of increased research and planning to develop human resources, invest in science and technology, developing basic infrastructure as well as a regulatory and institutional reform. General recommendations for the national level are: The first task is to create effective on the ground awareness and familiarity with the objectives, design and key stages of the Master Plan. At present, Government officials at the national level overall had a much better understanding on the meaning, opportunities and requirements for implementing the MP3EI as compared to the private sector and civil society. A clear set of expectations from different groups of stakeholders needs to be established, as now there is cross over in expectations of different stakeholders- particularly between the private sector and government officials. Increased available information for the private sector as well as inclusive public communication are the first steps in establishing a long term working relationship between the private sector and government to implement the MP3EI. A regulatory review to ensure that the MP3EI can be supported by laws and regulations which are streamlined through the regional and national level. MP3EI Working Units need to be established which coordinate regularly with the national level. These groups should involve a breadth of stakeholders and their targets and quarterly progress should be made available as public information. Improving basic infrastructure should be seen as a national government priority in order to attract private investment in commercial infrastructure. An Action Plan needs to be developed on looking at the short and long term needs of developing human resources in each of the six corridors. At the moment, it is not clear in the MP3EI where funding is to be sourced to establish training centers and other resources develop Indonesia s man power. The MP3EI document lays out a breakdown for the infrastructure budget, but there is a lack of a breakdown of a budget for human resource development. An Action Plan needs to be established on the strategies when moving from an infrastructure to an economic corridor learning from the international experience. The national PPP framework needs to be reviewed, projects need to synergize between the national and regional level, with only feasible projects which are ready to commence advertised. The President also needs to take the lead at the national figurehead for the development of PPPs in Indonesia. Page 5 of 87

6 A review of the financing budgeted for the eastern parts of Indonesia needs to be carried out as eliminating regional disparities are a priority for the MP3EI but yet there is a lack of financing in eastern Indonesia which acts as a barrier to growth and also private investment. An important theme in the implementation of the Kalimantan Corridor was the perceived clash with efforts to become more environmentally sustainable. Connectivity was an important issue as at the moment there is a lack of sharing of information between Kalimantan s four provinces, however this was much more of a prominent theme in the Bali- Nusa Tenggara Corridor since this corridor aims to pull together a series of islands. Eastern Indonesia also has more prominent issues in underdeveloped basic infrastructure and human resources, far much more than Kalimantan. As such, special attention should be given to the Bali- Nusa Tenggara Corridor as well as other eastern Corridors in constructing basic infrastructure with the overall aim to reduce regional disparities. In terms of sequencing, similar to the East- West Economic Corridor of the Greater Mekong Delta Sub- Region, the MP3EI has dedicated the first phase of the implementation process from 2011 to 2015 as solely in infrastructure investment. The purpose behind this is to increase the inter-corridor connectivity and set basic foundations for the second phase. The East West Economic Corridor found relative success in the infrastructure phase, and significant increased trade and investment flows as a result. However, difficulty was found in the move from an infrastructure corridor to an economic corridor. For the second phase of the MP3EI, covering the period from 2015 to 2020, attention needs to move further down to the regional level. After infrastructure corridors are established, the regional government should have a better awareness and ability to fulfil its roles. Increased responsibility at the regional level for implementing MP3EI would serve as a faster method of implementation rather than at the national level and each Corridor would be able to adapt to its local situation easily. The MP3EI should not be bound to a one size fits all policy, but the regions should have the capacity to implement the policy according to the different needs and abilities of each corridor. Page 6 of 87

7 Introduction Background The Master Plan for the Acceleration and Expansion of Indonesia s Economic Development (MP3EI) is the government s most prominent economic development policy in the last decade. This ambitious policy aims to leapfrog Indonesia into the ten biggest economies by 2025, by increasing GDP to US $4.5 trillion as well as by increasing GDP per capita income from US $3000 now to US $15,000. Under Presidential Regulation No. 32/2011, President Yudhoyono launched the MP3EI policy in May 2011 and the policy was supported by sectoral ministries, local governments and stateowned enterprises. The MP3EI has huge potential to develop economic growth through the promotion of six economic corridors: the Sumatra Economic Corridor, the Java Economic Corridor, the Kalimantan Economic Corridor, the Sulawesi Economic Corridor, the Bali- Nusa Tenggara Economic Corridor and the Papua- Kepulauan Maluku Economic Corridor. The MP3EI policy centres around three main strategies: to develop the six national economic corridors, to speed up the development of human resource capacity and national science and technology which will feed into the long term support of such accelerated economic development. The total investment required for the six corridors is Rp. 4,012 trillion. From this total, it is expected that the Sumatra Corridor will receive Rp. 714 trillion (18% of total investment), the Kalimantan Corridor will receive Rp. 945 (24% of total investment), the Java Corridor will receive Rp. 1,290 trillion (32% of total investment), the Sulawesi Corridor will receive Rp. 309 trillion (8% of total investment), the Bali-Nusa Tenggara Corridor will receive Rp. 133 trillion (3% of total investment) and lastly the Papua- Kepulauan Maluku Corridor will receive Rp. 622 trillion (15% of total investment). The Master Plan identifies eight primary programs and 22 primary activities as the focus of national development. The eight primary programs are: agriculture, mining, energy, industrial, marine, tourism, telecommunications and the development of strategic areas. The strategic initiative of the Master Plan is to encourage large-scale investment in 22 primary activities: shipping, textiles, food and beverages, steel, defence equipment, palm oil, rubber, cocoa, animal husbandry, timber, oil and gas, nickel, copper, bauxite, fisheries, tourism, food and agriculture, the Jabodetabek area, the Sunda Straits strategic area, transportation equipment, and information and communication technology. Fundamental to the MP3EI policy is the importance of promoting a new way of thinking- Not Business as Usual. This new ideology is to come from increased collaboration and inputs from national government, local governments, state-owned enterprises, private sector companies and local communities. The Indonesian Government has limited funds to finance development through its State Budget (APBN). According to the MP3EI, 44% of the total investment needed is expected to come from Page 7 of 87

8 the private sector and state-owned enterprises. Under the MP3EI, all existing regulatory frameworks must be evaluated, and strategic steps must be taken to revise and change regulations in order to attract such support from investors. Incentives will be implemented on tariffs, taxes, import duties, labor regulations, licensing and permits and land procurements. In order to achieve these goals, the central and local governments must build a stronger link within and beyond the centers of economic growth. Although the policy lays out a promising plan to advance Indonesia s economy, it has often been noted that its Achilles heel is in the implementation stage. Others have noted that the Government s previous large scale development acceleration programmes in Indonesia have not fulfilled their promises, such as the 2007 Presidential Instruction on real sector development acceleration and the 2010 Presidential Decree on acceleration of poverty reduction. 2 The Committee on Economic Development Acceleration and Expansion of Indonesia (KP3EI) is an institution established by the President of the Republic of Indonesia on May 20, 2011 to coordinate the implementation of MP3EI. The Master Plan recognises that Indonesia must overcome a number of challenges: a failure to achieve value-added input in the agricultural and extractive industries; a developmental gap between western and eastern Indonesia; the lack of infrastructure support generally; a lack of connectivity between regions; inadequate quality of human resources and rapid urbanisation. The steps to realise the Master Plan include: bureaucratic reform, including the legislature and judiciary, tax reform and incentives, the creation of special economic zones in each of the corridors, improved shipping and airline capability (ports and airports) to promote connectivity, and increased high school and vocational training to improve human resources. Many elements in the plan are unique points of departure for Indonesia. For example, the Master Plan states that the Government bureaucracy will support the needs of business and provide equal treatment and fair opportunities for all businesses, Government loans will be used to finance investment instead of routine expenditures, such as subsidies and subsidies will be targeted at the disadvantaged rather than for goods, taxes will be on Indonesian sourced income and not worldwide income, taxes will be based on consumption rather than value added taxes, and employment regulations will be supportive of employers as well as employees. Evidence Used in the Study/Data Sources This paper highlights the key barriers to implementing the MP3EI policy and makes recommendations for successful implementation. Using an evidence-based approach, this paper makes reference to data collected during past meetings with stakeholders. Since this project has mainly looked at the implementation barriers and requirements at the national level and specifically at the Kalimantan and Bali- Nusa Tenggara Corridors, the bulk of the 2 Business Section, I m not optimistic with the MP3EI: economist, The Jakarta Post, July 25 th 2011 Page 8 of 87

9 recommendations are made for national level as well as Corridor specific recommendations for the Kalimantan and Bali- Nusa Tenggara Corridors. Data has been collated from meetings and interviews with government officials, members of the private sector and of civil society from all of the six Economic Corridors as outlined in the MP3EI. PT Strategic Asia Indonesia facilitated four seminars, two at the regional level and two at the national level in order to gather opinions from a wide range of stakeholders. A market research company, the Polling Center, based in Jakarta, supported PT Strategic Asia Indonesia and undertook three rounds of interviews with project stakeholders. During the length of this project, the Strategic Asia team gathered data from a wide range of sources from across the Indonesian archipelago. Field trips took place in East and Central Kalimantan, Lombok, Bali, Aceh and Makassar in order to gather area specific data needed to supplement project research, as well as to gain support for two regional seminars which occured in Kalimantan on 6 th October 2011 and in Lombok on 6 th December Both seminars addressed the specific needs of the regions; the first addressing the Kalimantan Corridor and the second the Bali- Nusa Tenggara Corridor. In preparation for our two regional seminars, trips were made to Central and East Kalimantan for the first seminar and to Lombok and Bali for the second in order to meet key stakeholders, speakers and with the BAPPEDA offices in order to secure cooperation in co-hosting these events. Strategic Asia undertook meetings in Jakarta in preparation for the third and fourth seminar entitled Climate Change Mitigation and the MP3EI and Implementing the MP3EI on the National Level. These seminars were both two day events and took place on the 8 th and 9 th of February 2012 and 14 th and 15 th March 2012, respectively. Apart from guests from Jakarta, both seminars also featured one international speaker from London and included participants from across Indonesia: Sumatra, Kalimantan, Sulawesi, Bali, Lombok and Papua. Strategic Asia also signed a contract with an Indonesian market research company, the Polling Center in August The Polling Center attended the Kalimantan, Lombok and the Climate Change Mitigation and MP3EI seminars to undertake one to one meetings with participants alongside the event. A broad range of stakeholders were interviewed, from government officials, members of the private sector, NGOs, Universities, research organizations, and the Donor community. A total of 18 interviews were conducted during the Kalimantan seminar and 20 additional interviews were conducted during the Lombok seminar. After the two regional seminars, the Polling Center conducted 38 interviews in Jakarta. Details of the interviewees can be found in the Annex of this report. During these three rounds of interviews, the Polling Center quantified data on the awareness of the MP3EI; views on perceived opportunities coming from the MP3EI; barriers and solutions for implementation; synergy with the RJPMN (the medium term development plan) and roles of stakeholders. Verbatim quotes from these stakeholders coming from interviews with the Polling Center can be found throughout this paper separated in text boxes. Page 9 of 87

10 Furthermore, focus group discussions were a large feature of this project. All four seminars were made up of a panel sessions with presentations as well as smaller breakout discussions with specific issues for discussion. The agendas, participant attendance lists and seminar summaries for all four seminars are provided in the Annex for further information. Alongside preparation for seminars, Strategic Asia staff also met with key stakeholders in Jakarta as part of collating and consolidating research. Extensive secondary research has also been ongoing throughout the life of this project. Data has been collected from government resources, secondary literature and Indonesian and international media. Page 10 of 87

11 Figure 1 - MP3EI Economic Corridor Map Source: MP3EI p. 46 The Six Economic Corridors 1. Sumatra Economic Corridor as a Centre for Production and Processing of Natural Resources and As Nation s Energy Reserves 2. Java Economic Corridor as a Driver for National Industry and Service Provision 3. Kalimantan Economic Corridor as a Centre for Production and Processing of National Mining and Energy Reserves 4. Sulawesi Economic Corridor as a Centre for Production and Processing of National Agricultural, Plantation, Fishery, Oil & Gas, and Mining 5. Bali Nusa Tenggara Economic Corridor as a Gateway for Tourism and National Food Support 6. Papua Kepulauan Maluku Economic Corridor as a Centre for Development of Food, Fisheries, Energy, and National Mining Page 11 of 87

12 The Concept of an Economic Corridor The Asian Development Bank s definitions of an Economic Corridor are as follows 3 : 1. A well-defined geographic area which includes transport arteries such as roads, rail lines, or canals. 2. It highlights on bilateral initiatives and focuses on strategic centers particularly at border crossings between two economies 3. It emphasizes the physical planning of the corridor and the surrounding area by focusing on infrastructure development and optimal maximization of benefits. Economic corridors aim to attract investment and generate economic activities in a particular region in view of realising the economic development potential of a given region with essential features of lower distribution costs and improved land acquisition. Physical links and logistics facilitation are key elements towards achieving these aims. Physical connectivity between the centres of economic growth will be significantly developed upon massive investments in infrastructure. Moreover, improved infrastructure, partnered with cross-border cooperation among the neighbouring countries, can accelerate the process of integrating the country s economic corridors into the global market. Successful implementation of economic corridors requires strong political will with the placement of appropriate infrastructure as well as streamlined competitive regulations to facilitate the movement of goods and people. Economic Corridors in Indonesia Growth centres, connectivity and infrastructure are the main building blocks of the Indonesian Economic Corridors. Economic growth centres will be developed through industrial clusters and special economic zones (SEZ). These economic hubs will be developed in each economic corridor in line with the local potentials and specialisations of each region. For instance, the MP3EI identifies Kalimantan as an energy hub, Bali as a tourism hub and Sumatra as an agroindustry centre. These different types of economic activities need to be accompanied by improved connectivity and infrastructures links. To facilitate the movement of goods and services across economic corridors, connectivity between regions should be developed to accelerate and expand economic development. Connectivity infrastructures such as construction of transportation routes and information and communication technology (ICT) within and across the regions will reduce transportation and logistical costs. Infrastructure improvements in roads, seaports, airports, water, energy and electricity, and others are also needed according to the economic activity required in the main industrial clusters. Therefore it is crucial for these infrastructures to be of high quality if a competitive final product is desired. In addition, the provision of the various infrastructures across the corridors will need a pool of skilled workers who are experts for each type of economic activity. 3 Ruth Banomyong, Benchmarking Economic Corridors Logistics Performance: A GMS Border Corssing Observation, World Customs Journal Page 12 of 87

13 Table 1 - The Economic Activities Promoted by the MP3EI per Corridor Source: MP3EI p.48 and p.49 Page 13 of 87

14 Figure 2 - Estimated Investment Required for the Main Economic Activities of the MP3EI Source: MP3EI p.50 Page 14 of 87

15 Implementation Phases of the MP3EI Figure 3 - Implementation Phases of MP3EI Source: MP3EI p.50 As illustrated above, Phase 1 ( ) intends to focus on the implementation and operationalisation of the MP3EI implementing committee. One of the action plans prepared is the debottlenecking of different pending regulations, licenses, incentives and the commencement of investment commitment. All of the pending regulations and permits at the national and regional level must be revised to support the development of main activities related to spatial management, man power planning, regional tax, application of communal land, mineral and coal mining business uncertainty, simplification of business patterns in the oil and gas industry, private sector participation in providing electricity, renewable energy, defence equipment, railways, airports, tourism, and Public Private Partnerships (PPPs), among others. See Annex for a detailed list of the pending laws. Moreover, strengthening of national connectivity is a priority for Phase 1 by assigning primary seaports and airports as international exchange centres in western and eastern Indonesia. Human resources development, research facilities, research activities and other capacity building activities will also be strengthened to serve as a good foundation for the first phase. Phase 2 ( ) intends to focus on the acceleration of long term infrastructure development, increasing innovation to boost competitiveness, improvement of economic governance in various fields and the promotion of industries that will create added value. Phase 3 ( ) will leverage on the competitive advantage of national industries globally and high level technology adaption for future development projects. Successful implementation of converting the infrastructure corridors into economic corridors will also take place in this phase. Page 15 of 87

16 The Action Plan, for successful implementation of the MP3EI, will be discussed later in this report. This action plan has considered the international experience specifically from the Lower Mekong Delta Action Plan and the Indonesia-Malaysia-Thailand Growth Triangle Action Plan. Barriers to Implementing the MP3EI Figure 4 - Barriers to Implementing MP3EI 1. Public Communication and Awareness 9. Clash with Environmental Sustainability 2. Unclear Synergy with the RJPMN 8. Lack of National Financing and Disincentives to Private Investment Barriers to Implementing the MP3EI 3. A Need for Regulatory Reform 7. Underdeveloped Human Resources 4. A need for Institutional Reform 6. Regional Disparities 5. Underdeveloped Infrastructure Page 16 of 87

17 1. Public Communication and Awareness No other policy initiative has received either such a high profile or so much attention in the entire period following the collapse of the New Order. However, a lack of awareness amongst key stakeholders is a significant finding of this project. Despite the fact that the MP3EI sets out to implement this project in a Not Business as Usual mindset by involving stakeholders in a collaborative approach, we have found that there is a disparity in awareness and knowledge of the MP3EI amongst government officials and members of the private sector and civil society organizations. Notably, various levels of awareness and knowledge were also found across different areas of Indonesia. As expected, it was government officials as a group who were the most knowledgeable about the concept of the MP3EI. Furthermore, government officials who were interviewed in Jakarta had a better understanding of the MP3EI than their regional counterparts. As yet, there is no virtual secretary or one website dedicated to the MP3EI. This acts as a barrier to spreading awareness on the MP3EI, as there is not one central source of information which can inform stakeholders about the concept and ongoing implementation of the policy. Many members of the private sector have raised this as a concern. Not having access to regularly updated information, on relevant laws and regulations in particular, would act as a barrier to investing, as noted by many members from the private sector. Verbatim Quotes from the Polling Center in response to the question on the socialisation of the MP3EI: I feel that the MP3EI might be just another government strategy that has just been packaged differently Private Sector, Kalimantan Seminar The biggest obstacle the MP3EI faces is the danger of conflict that will arise during the implementation since the actual planning of it was neither discussed nor consulted with relevant stakeholders and the community who lives in the targeted areas of development Civil Society, Kalimantan Seminar.. To be honest, I have only briefly heard about the MP3EI and it seems to me that it will be much focused on the development of each respective region... Private Sector, Lombok Seminar It is only after attending this seminar that I knew about the MP3EI Government Official, Lombok Seminar.. It is still a one-way relationship with the MP3EI Maybe later on will the government feel it necessary to make a special effort to socialise the MP3EI... Government Official, Jakarta Interviews undertaken in Kalimantan show that whilst all three categories of respondents possessed a fairly good awareness of the MP3EI, there was a tendency for the respondents from the government group to have a deeper awareness on the policy. Generally, most of the participants of the Kalimantan seminar held in October 2011 were aware of the MP3EI, but some stated that they had only researched the MP3EI following the invitation of the seminar. Importantly, local government officials noted that they felt that the central government were much more aware and, therefore, prepared for the implementation of the policy. Interviews during the Lombok seminar showed that from the three categories of respondents, the private sector and civil society had a lower level of understanding of the MP3EI than government Page 17 of 87

18 officials. Although the government had a much better understanding of the MP3EI, many answers were limited to giving the definition of the MP3EI. Members of civil society organisations in particular stressed the need to involve the indigenous people of Kalimantan in the implementation of the MP3EI. As mentioned in the outcomes of the breakout sessions of the Balikpapan seminar, participants were weary of the possible rise in tensions and resistance from indigenous peoples during development policy implementation like the MP3EI. Similarly during the Lombok seminar, one participant from Kupang University noted that the local customs and traditions of groups in Nusa Tenggara Timur must be respected and involved in making economic development plans, otherwise the government runs the risk of marginalising these groups, which could lead to social conflict. During the National Level Seminar in Jakarta, Dr. Deddy Hadriyanto from Mulawarman University raised the same concern. Bapak Deddy stated that the use of traditional customary law is still very strong amongst many groups, such as the Sasak people in West Nusa Tenggara. As such, there may be potential tension if drastic economic development does not respect the rights of such groups. It is vital, therefore that effort is made to discuss with all groups of society about such large and important plans like the MP3EI. Furthermore, under the KP3EI (the Commission on the Acceleration and Expansion of Indonesia s economic growth) the organisational structures set up for the implementation of the Kalimantan and Bali- Nusa Tenggara Corridors show that the majority of the people involved are government officials. The President, Governors, Mayors, Para Walikota and Ministers have been allocated as main stakeholders in the MP3EI Implementation Task Teams and Secretariat. Organisational diagrams to demonstrate these can be found in the Action Plan section of this report. 4 Economist Fadhil Hasan has argued that the MP3EI has been prepared as a top-down Master Plan, by the centre for the regions and that there are still many regions that are sceptical to the MP3EI plan. "In order for the regions to have a sense of ownership over MP3EI, there should be further socialisation to the regions. Moreover, so far, it is the governors that have been involved in the discussions, not the regents, who have the autonomous authority," he has stated. 5 Ultimately, involving all stakeholders is the only way to hear the views of the people who the policy will affect. Such socialisation is necessary to achieve implementing a policy which can benefit as many as possible, which essentially is the core aim of the MP3EI. 4 AusAID Indonesia Infrastructure Initiative, as taken from Kompas Newsaper, 9 th June AusAid Indonesia Infrastructure Initiative, as taken from Kompas Newspaper, 9 th June 2011 Page 18 of 87

19 2. Synergy with the RPJP and the RPJM Law No. 25/2004 regarding the National Development Planning System mandated the integration of Indonesia s long, medium term and annual development plans. This also indicates that the Law acts as a legal umbrella for the implementation of development plans in order to guarantee the achievement of the country s goals. The National Long Term Development Plan (RPJPN) has become the basis for development programs for a period of 20 years commencing from 2005 to In addition, RPJPN also serves as a guideline for the preparation of the National Medium Term Development Plan (RPJMN) which is a development program 5 years in length. The question that arises here is to what extent does the MP3EI synergise with the RPJPN and the RPJMN? 6 The majority of spokespersons in the national media have expressed a positive attitude towards the synergy of the policies. For example, Wahyu Utomo, the head of MP3EI integration programme at the Office of the Coordinating Ministry of Economic Affairs at a conference in Yogyakarta stated that the MP3EI programme is complementary to the National Medium-Term Program Plan (RPJMN). 7 Similarly, the Provincial Secretary of Nusa Tenggara Barat delivered a welcoming speech at the Lombok Seminar which expressed the optimism that both sets of policies are aligned. Dr. Ir. Max H. Pohan, CES, MA, Deputy Minister for Regional Development and Local Autonomy Affairs of National Development Planning, BAPPENAS has stated that the two Verbatim Quotes from the Polling Center in response to the question on the synergy among the RPJP, RPJMN, and MP3EI:..It is synergised because the RPJPN is more on the general approach, but the MP3EI is more focused on the national and regional economy with all its pre-requisites to achieve economic growth and push the economic growth with various conditions. In this case, the regulations, mindset of the people, and institutionalisation should be right Government Official, Kalimantan Seminar..It is synergized with two considerations (i) fairness in distribution of funds for each corridor (ii) commitment of local and central government.. Civil Society, Kalimantan Seminar.. The MP3EI emphasises more the role of the private sector in its implementation whereas the RPJPN focuses more on the development activities purely funded by the government Government Official, Lombok Seminar The MP3EI is the best amongst the existing development plans since it basically focuses on a long term national development plan that can only be implemented in accordance with the government s capacity Private Sector, Lombok Seminar..To be honest, I do not know the details of the RPJPN and the MP3EI.. Private Sector, Lombok Seminar Although not yet quite obvious, the synergies should be found since there are probably several components of the RPJPN that is similar to that of the MP3EI... Government Official, Jakarta.. At the very least they should have a link. They can probably complement each other with regard to developmental support. As part of a business society, I expect a synergy between the MP3EI and RPJPN. The important thing is that they don t overlap or veer off the course... Private Sector, Jakarta 6 National Connectivity 2011 Special Edition, Sustaining Partnership, The Connectivity of Six Economic Corridors 7 Wahyu Utomo speaking at MEP UGM, Yogyakarta, 23 rd December Page 19 of 87

20 policies are complementary but that their difference lies in their implementation: the MP3EI promotes the private sector as the main actors, whereas under the RPJPN, the government is the main actor for implementation. The reason for the promotion of the private sector as the main actor for implementing the MP3EI is because a large proportion of the financing for the projects is expected to come from the private sector. Most of the stakeholders interviewed by the Polling Center throughout this project also stated that they believed that the two types of policy can synergise, since they are both based on similar founding principles. Overall, participants from the Kalimantan Seminar had the view that the MP3EI s vision and mission are aligned with the RPJPN. A few participants viewed the MP3EI as a part of RPJPN, due to its coverage areas (divided into corridors); however, since its field (MP3EI is primarily economically focused) is different from RPJPN s, therefore, the implementation of the MP3EI s was viewed as different from the RPJPN. However, the Polling Center also found that such synergy can only occur if supported by a number of conditions including: intensive commitment and communication between the central and local government, aligned policies between the central and local government and zero-deviation from the implementation actors of MP3EI. Participants from the Lombok Seminar on the whole had the view that the two programmes can be synergised because they viewed the MP3EI as an elaboration of the RPJPN, however they had the view that the MP3EI is focused on developing infrastructure, while the RPJPN s scope is broader. Government officials in Jakarta who were interviewed by the Polling Center had an understanding of the differences and similarities between the RPJPN and the MP3EI. However, the majority of respondents were not able to say whether the MP3EI would support the RPJPN or vice versa. Despite the fact that there is generally a good feeling that the two programmes can be aligned, it must be taken into the account that the previous section of this paper highlighted the fact that a majority of stakeholders are under informed about the MP3EI. Therefore it can be argued that their knowledge of the ability of the MP3EI to synergise with the RPJPN and RPJMN is limited. Furthermore, the process to assign stakeholders to implement the MP3EI is still under process, so there is not a clear policy as yet on how the tasks to implement the RPJPM, RPJMN and the MP3EI will be separated or merged. Page 20 of 87

21 3. Regulatory Reform Being the centre of all structural reforms, regulatory reform is a vital component of the first phase ( ) of the Master Plan. The first phase of the MP3EI aims to: At the national level: re-evaluate cross sector regulations and restructure permit applications related to spatial management, labour, taxation and the ease of capital investments 8 ; and At the local level: review regulations and permits concerning the mineral and coal, forestry and transportation sectors as well as basic infrastructure. 9 For investments in infrastructure to occur, the MP3EI recognises that a number of regulations need to be removed, aligned or reviewed in at least seven national laws, seven government regulations, five presidential regulations, presidential decrees, presidential instructions, nine ministerial regulations and a number of local regulations and permits. 10 The Annex contains a list of these proposed changes. So far, twenty seven regulations have been completed, eleven regulations are being revised, and eight regulations are to be revised. 11 Verbatim Quotes from the Polling Center in response to the question on the government regulations:...the biggest barrier that every investor talks about is the lack of regulations and standardised issues... Private Sector, Kalimantan Seminar...The government always restricts the flexibility of the private sector; there is not even a distinction made between ownership and contracts even though the government is in cooperation with the private sector. This is the biggest obstacle faced at the moment... Current regulations must be reviewed to stimulate the private sector s work and must be backed up by the law... Government Official, Jakarta Seminar Banking on large private sector investments means that the Indonesian government will need to create a more favourable and conducive environment that can win the trust of the private sector through orderly regulations, fewer risks for misinterpretation, increased trust and the utmost participation from investors in this process. The main problem is that Indonesia currently does not have an independent regulatory review agency or an implemented Regulatory Impact Analysis. Horizontal and vertical inconsistencies and overlapping laws and regulations remain major issues that upset domestic and regional investment climate as well as hurdle infrastructure projects. Findings from the Polling Center data show that constraints could arise when the concept of MP3EI is applied on the ground considering the current regulations and policies as well as worries about overlapping government policies. For example, regulations and political parties which change frequently in line with changes in the political leadership represent an obstacle 8 MP3EI MP3EI Asia Pacific Economic Cooperation, 2011, Indonesia s Structural Reform Priorities, Residential Training Workshop on Structural Reform Singapore 11 From a presentation given by Dr. Ir. Dedy S Priatna, MSc, Deputy for Infrastructure Affairs, Bappenas during the UK FCO Strategic Asia Implementing the MP3EI on the National Level Seminar, Jakarta, 14 th March Page 21 of 87

22 much lamented by business people. In light of this, it is necessary that all policy-makers and the country s legislative body have a clear understanding and strong commitment to adhere to the principles of the MP3EI and RPJPN in making any further or revising policies and regulations. Concerns from civil society about information relating to environmental regulations, the freeing up of land, taxation, import duties, and tenders were also present. Members of the private sector and civil society stated that they wanted transparent access to information and regulations related to the programme. The private sector also expressed that they desired information on new policies or changes to existing rules in both the national and regional level. The private sector also felt that it was vital that such rules and regulations be amended, since the current state of inconsistent policy from province to province creates a barrier for investors. Increased consistency in policy and available up to date information on policy changes will make it easier for private sector investors to easily assess the viability of investments and act quickly when they see an investment opportunity. Moreover, members of the private sector and civil society are both aware of the need for clear and consistent regulations in order to get rid of investor doubts since these regulations would also affect the business players on their business expansion activities while keeping up to local traditions and customs. Delay of Land Acquisition Enactment Despite the passing of the land acquisition bill, the parliament has postponed the issuance of its presidential regulation 12. Although the government intended to issue the regulation on February 2012, it could not push through since the draft regulation submitted by the National Land Agency (BPN) still requires further discussion and clarification. 13 The issuance of the presidential regulation on the Land Acquisition is expected to be finished within six months since the passing of the bill, which is June This has resulted in a prolonged process of passing a law which many see as a progressive instrument for improving the country s physical infrastructure. To remove the reluctance of the private sector to take part on the Public Private Partnerships (PPP) programs, the finalisation of the Land Acquisition Law and Spatial Planning Law (RTRW) are essential in realising the desired huge private sector participation in infrastructure projects and in allowing the progress of the MP3EI to move forward. Our findings from the Polling Center reports further implies that until this Law is passed and fully implemented, there remains bottleneck issues and confusion at the local level as to what land would be used for business pursuits, mainly in oil and gas, coal mining, and what land needs to be protected as part of the President s commitment to reduce greenhouse gases by 26% in Enactment of Tax Holiday Regulation In August 2011, the most anticipated tax holiday regulation (Minister of Finance Regulation No. 130/PMK.011/2011) was enacted to provide two types of tax facility, namely (i) corporate income tax exemption and (ii) corporate income tax deduction. An income tax exemption for five to ten years will be granted to businesses in pioneering industries starting from the year tax of the corporate taxpayer s production. Issuance of this regulation is expected to boost 12 Jakarta Post, Enactment of land acquisition law delayed again, 14 th March Jakarta Post, Enactment of land acquisition law delayed again, 14 th March 2012 Page 22 of 87

23 investments in infrastructure, attract increased numbers of foreign investors, and ramp-up resource-based manufacturing industries. One of the worth mentioning stipulations under the Tax Holiday Regulation is the provision that administers the possibility to prolong the exemption or deduction of corporate income tax. The provision entails two elements to be regarded which are the preservation of national competition and an evaluation of the strategic value of a particular business. 14 The lack of clarity in terms of explaining when or how national competition needs to be maintained or the limitations of understanding the strategic value of a particular business may cause various interpretations of this stipulation or provision. Since multiple interpretations of this provision may lead to uncertainty and ambiguity, the Indonesian government should clarify these provisions to effectively implement the goals of the Tax Holiday Regulation. Infrastructure Bonds To help finance the needed infrastructure projects, the national government is preparing to issue infrastructure bonds. Such bonds should immediately be issued in order to make plans to accelerate infrastructure development a reality. By providing a government guarantee, bonds would attract investors. 15 Directorate General of Debt Management Rahmat Waluyanto recently announced that such infrastructure bonds will not be issued until February or March Institutional Reform Many stakeholders throughout this project argued that a large barrier to the implementation of the MP3EI lies in the poor capacity of institutions, especially at the regional level; corruption and a mismatch of communication and information between the national and regional level. Corruption Post Big Bang decentralisation in 2001, many scholars have argued that corruption has actually increased as national control over the regional government has decreased. 17 Indeed, a year after regional autonomy entered into force, a wave of corruption cases swept across Indonesia s newly empowered regional parliaments. Commencing with the most storied case in West Sumatra in 2002, other regions followed soon thereafter South East Sulawesi, West Kalimantan and Lampung. Virtually all regions saw allegations of corruption emerge. In 2006, there were 265 corruption cases involving local legislative bodies with almost 1,000 suspects handled by prosecutorial offices across Indonesia. 14 SSEK Law firm website, 2011 Indonesian Law Review on Tax Holiday, Accessed on 2 nd April Investor Daily, 28 November 2011, WITHOUT EXTRAORDINARY BUDGET, MP3EI ONLY A DREAM: Infrastructure Bonds to be Issued Soon, By Esther Nuky 16 Govt to launch global bonds in February 2012 Oleh Agust Supriadi December 19, Taufik Rinaldi, Marini Purnomo and Dewi Damayanti, Memerangi Korupsi di Indonesia Yang Terdedentralisasi World Bank, May 2007 Page 23 of 87

24 However, recent years have seen corruption on the decline. This could be due in part to increased freedom in the media following the end of the New Order which has encouraged public comment and transparency in fighting corruption. Indeed, President Susilo Bambang Yudhoyono has reaffirmed that his administration has zero tolerance on corruption. He noted that the Corruption Eradication Commission has been prolific in their investigations of graft, with notable success since its inception. 18 The international community is yet to catch up on domestic progress on and corruption is still seen as a problem in Indonesia. Indeed, Mr. Jonathan Mantle, an international expert from London who spoke at the National Level seminar, Jakarta, on March 14 th 2012 noted that from the international perspective, Indonesia s reputation for corruption is not investable. In 2011, Indonesia was ranked at 3.0 on Transparency International s Corruption Perception Index, rising from 2.8 in both 2010 and Corruption becomes a barrier since the MP3EI relies on such large amounts of private sector investment, including foreign investment. Verbatim Quotes from the Polling Center in response to the question on the coordination between the regional and national government:..the local government is unprepared. The implementation at the local level is not easy since the community should also be taken into account. Aside from that, the RPJMN and the MP3EI should also be synchronized Government Official, Kalimantan Seminar... There is an obstacle on the coordination between the central and the regional governments because I haven t seen proper coordination between the two Private Sector, Jakarta an overlapping of authority and stipulations has happened to an extent, as well as a lack of clarity as to the developmental priorities themselves. This could continue unless the regional governments will be cooperative.. Private Sector, Jakarta Coordination between the Regional and National Government Members of the Private Sector who were interviewed during the Climate Change Mitigation and the MP3EI seminar noted that the implementation of the MP3EI is constrained by a lack of coordination between central and local government, especially concerning overlapping There is a lack of synchronization between the centre and the regions. What s more the spirit of autonomy in the regions brings its own obstacles. Also there have been clashes with communities over land disputes which have yet to be resolved also national planning tends to overlap Civil Society, Jakarta laws as regulations as discussed in the last section. Participants from the private sector who were interviewed at the Kalimantan Seminar also argued that they receive different information on laws and practices at the regional and national level, and thus this is confusing and, as a result, is a deterrent to investing. As already discussed, a lack of awareness at the local government is currently a barrier to implementing the MP3EI. This stems from a lack of an inclusive policy to share data and plans between the national and regional government. David Ray, Director of the Indonesia Infrastructure Initiative (IndII), an AusAID-funded facility to promote economic 18 President Susilo Bambang Yudhoyono, in The Oxford Business Group, Indonesia edition March 2012, p Corruption Perception Index, Transparency International, Where 10 equals a very low level of perceived corruption and 0 equals a very high perceived level of corruption. Page 24 of 87

25 growth through improvements in both the quality and quantity of Infrastructure in Indonesia, particularly in urban areas has spoke about the lack of coordination between the national and regional level. He has stated that central to the findings of Indll s first phase is that institutional problems, rather than resource constraints, are the primary reason for infrastructure failures. 20 Change in Mindset Throughout the project, many stakeholders have emphasised for the need of a change in mindset at the national and regional level in order for each region to synergise commitment from all levels of government. Indeed, the MP3EI needs the backing of political will from all echelons of government. However, implementing this is not easy and there is no one fixed policy to implement such change. 5. Infrastructure The national government has shown its commitment to overcoming infrastructure challenges in the MP3EI as well as in the current medium term development plan (RPJMN) for Deputy for Facilities and Infrastructures of Bappenas, Dedy Supriadi Priatna, has estimated that the investment needed to implement the six Economic Corridors reach the magnitude of Rp 4,012 trillion. Of that amount, about 43 percent, or Rp 1,725 trillion, is needed for infrastructure development. Meanwhile, the government's contribution is only about 10 percent in the form of basic infrastructures, such as roads, ports, airports, railway network, and power plants. Private companies and state-owned enterprises are expected to play a major role to meet these investment needs. Poor Infrastructure Prevents Economic Growth The current poor quality of infrastructure is one of the main factors preventing Indonesia s economy from growing at its potential rate of 8 percent. Inadequate infrastructure also results in high inflation compared to most of Indonesia s peers in South East Asia. Infrastructure development has been slow in the past decade and has relied heavily on government spending. The government has thus far not allocated sufficient funding for infrastructure Verbatim Quotes from the Polling Center in response to the question on the provision of infrastructure: To improve the qualities of infrastructure and human resources, we have to educate our human resources properly. They should participate in activities such as internship, or educational training to increase their knowledge and improve their skills so that when investments come, they are not only workers, but they can also be individuals that we can form partnerships with... Government Official, Kalimantan Seminar The infrastructure has two types: basic and social. Basic infrastructure includes the roads, ports, and bridges. Social infrastructure includes the Indonesian language, institutions, and regulations... Private Sector, Lombok Seminar..There must be synergy between the MP3EI and RPJPN. MP3EI is oriented towards infrastructure while RPJPN generally has both physical and nonphysical aspects... Government Official, Jakarta 20 AusAID Indll Page 25 of 87

26 development, while participation from private investors is still far below what is needed. Compared to other ASEAN-5 countries, many of Indonesia s main airports and seaports are outdated and often overcrowded. 21 Meanwhile, electricity supply needs to be boosted to meet surging domestic demand. Standard Chartered Indonesia ran scenarios in February 2011 to assess the impact of infrastructure development in the transport and electricity sectors. The best plausible outcomes showed that Indonesia s economy will grow between % between if the private sector participation rate reaches 50% of what is required and if the government increases spending on transport infrastructure by 20% a year. 22 Importantly, if the state-owned electricity company PLN increases annual capex by 20% and if private sector participation reaches 50% of what is needed, then growth could reach % over the same period. 23 Electricity As of February 2012, the electrification ratio of Indonesia stood at 71% with a target of 75% by the end of 2012 and 90% by the end of There are regional disparities in the growth of this sector, with the Java Island having a much higher rate of growth compared to other regions in Indonesia. Indonesia as a country also falls behind its neighbours in the region. Singapore s electrification rate is already at 100% whereas Thailand and Malaysia currently stand at approximately 90%. ICT Indonesia currently stands at 109 th place in the E-Government Index, whereas neighbours Malaysia, Singapore and Thailand stand at 32 nd, 11 th and 76 th place, respectively. A 2011 World Bank report found that increasing broadband connection by 10% results in a 1.12% increase in GDP per capita in developed countries and 1.38% in developing countries. 25 Water Eastern Indonesia lags behind in clean water supply as compared to other regions, especially Java. 26 The Kapuas, Kapuas-Barito, and Mahakam river basins represent 70% of Kalimantan s population and area, and 40% of the river basin area located inside the Heart of Borneo. A change in hydrograph of the river and increased demand for water for palm oil or other agricultural sectors could lead to a lack of water in the dry season. Possible water users that may experience negative impact are water companies, water-dependent industries, irrigated agricultural lands, palm oil companies and local communities Edward Lee Wee Kok, Eric Sugandi, Fauzi Ichsan, Jennifer Kusuma, Tai Hu, Indonesia Update, Standard Chartered Indonesia, 14 February Ibid 23 Ibid 24 Antara News, PLN Targets Serving 90% of Households by Late 2014, 7 th February Mastel, (Indonesian ICT Society) Toward National Connectivity- Challenge and Opportunity), Dr. Setyanto P. Santosa, Chairman of Mastel, Jakarta 21 September 2011 Presentation. 26 BPS Statistics, Value of Cleaned Water Distributed (Million Rupiah) A table showing this data can be found in the Annex. 27 Heart of Borneo: The Economics of Ecosystems and Biodiversity (HoB-TEEB). December 2011 Page 26 of 87

27 Poor Infrastructure Prevents Private Investment The Regional Secretary of Buleleng, Bali, Nyoman Sukarma, expressed that Buleleng's efforts to lure investors could be in vain, as the regency faced problems in meeting the increasing demand for electricity and telephone lines. Due to inadequate infrastructure, economic potential is yet to be met. Despite the current availability of electricity in Buleleng, the regency, which is included in the Java-Bali interconnection power grid, suffers power shortages due to a lack of power stations. Buleleng is also an example of lack of synergy between the regional government and state owned enterprises, as the Regional Secretary stated We can develop new roads with our budget, but the policies of state-owned electricity company PLN and state-owned telecommunications PT Telkom regulate the electricity and telephone lines. I'm afraid our efforts to lure investors will be useless without a clear policy from the two state-owned firms. 28 Stakeholder Views The Balikpapan Seminar also highlighted the importance of investing and developing infrastructure in Kalimantan. Participants argued that the opportunities created by the MP3EI would not be realised until sound infrastructure could be developed. Furthermore, a presentation given by HSBC in the Lombok Seminar stressed the importance for the national and regional governments to take the lead in basic infrastructure, whereas commercial infrastructure could be left to the private sector. As yet, a clear distinction from the national government between the two types of infrastructure is lacking. Power supply to support infrastructure is currently inadequate to support the implementation of the Kalimantan and Bali- Nusa Tenggara Corridors. Throughout the Balikpapan seminar, many participants were weary of the irony of the fact that although Kalimantan has a huge energy resource, its own electricity supply is inefficient and often leads to unpredictable blackouts. The MP3EI states that the fishing industry is one which could be expanded in Kalimantan. However, uncertain supplies of electricity have meant that this area has not attracted as many investors as it would have otherwise. Priority of Infrastructure as the First Phase of the MP3EI Realising the importance of this barrier to the MP3EI, the Indonesian government has prioritised the first three years of the implementation of the MP3EI solely to building basic infrastructure and progress has already begun. Between May and December 2011, Rp trillion has already been spent on implementing the MP3EI programme, involving 91 infrastructure and economic development projects. In 2011, the budget was 20.6 trillion, and for 2012 it is expected that Rp 36.7 trillion will be spent on infrastructure. Infrastructure Projects already in Construction The table below shows the number of infrastructure projects which have already begun in each of the six economic corridors. However, what immediately stands out is the disparity between the regions, with Java, Sumatra and Sulawesi receiving much more of the capital than other regions. Many individuals from the private sector who were consulted as part of this project stated that building basic infrastructure is a necessary requirement before any investment will 28 Jakarta Post, Asian Development Bank Calls RI s New Economic Plan Realistic, 14 th June Page 27 of 87

28 take place. For example, PT Chareon Pokhphand, Bali, a company specializing in selling chicken products, discussed at the National Level Seminar in Jakarta how they would want to expand towards Nusa Tenggara Timur, but were restricted by the lack of reliable electricity resources and roads in the eastern parts of the Corridor. Figure 5 - Infrastructure Projects Under Construction Source: From a presentation given by Dr. Ir. Dedy S Priatna, MSc, Deputy for Infrastructure Affairs, Bappenas during the UK FCO Strategic Asia Implementing the MP3EI on the National Level Seminar, Jakarta, 14 th March Poor Infrastructure and Regional Disparities Figure 6 also shows that the plans for infrastructure investment allow for much higher levels of financing for the Sumatra and Java Corridors than for the remaining four. Increasing investment in infrastructure in Java and Sumatra, but failing to recognise the need in eastern Indonesia could hinder the growth and levels of investment in eastern Corridors and affect the economic growth of Indonesia as a whole. Page 28 of 87

29 Figure 6 - Total Projects and Total Investments in the MP3EI Source: From a presentation given by Dr. Ir. Dedy S Priatna, MSc, Deputy for Infrastructure Affairs, Bappenas during the UK FCO Strategic Asia Implementing the MP3EI on the National Level Seminar, Jakarta, 14 th March Regional Disparities Essentially, the purpose of the MP3EI is to raise the GDP per capita from $3000 to $15,000 by 2025 whilst raising the living standards of Indonesia s population. Therefore, fundamental to preparing the implementation of this policy must be the priority of equaling economic growth and investment amongst the six economic corridors. Government spokespersons, for example, Dr. Ir. Endah Murniningtyas, M.Sc., Deputy Natural Resource & Environment, BAPPENAS, during her keynote speech at the Climate Change Mitigation and the MP3EI seminar, discussed that the disparities of Indonesia s regional economic growth are a huge problem. Thus it is the aim of the MP3EI to focus on the development outside Java. However, looking at the financing allocation in the MP3EI it can be seen that the eastern islands of Indonesia are still to receive less funding than their western counterparts. Moreover, Dr. Ir. Max H. Pohan, CES, MA, Deputy Minister for Regional Development and Local Autonomy Affairs, National Development Planning Agency (BAPPENAS) argued that the success of regional development determines the success of national development. Therefore, Page 29 of 87

30 despite the fact that the MP3EI has increased national and regional funding, insufficient financing to the eastern parts of Indonesia is likely to hinder the overall growth of the country and is likely to worsen regional disparities. Although not stated by Dr. Pohan, allowing increased regional disparities could arguably result in unity issues within the archipelago. Figure 7 - Regional Inequality in Indonesia Considering that the private sector have expressed a need for basic infrastructure to be in place before planning to invest, it can be argued that not funding eastern Indonesia with enough money to secure basic infrastructure, hinders its growth and could fall further behind growth seen in Sumatra and Java. Lack of financing also means that the development of human resources and science and technology are also stunted, and critically, private sector investment in such areas becomes less attractive compared to areas such as Sumatra and Java which are becoming more developed, have easier access to information, better human resources and better quality infrastructure. 29 Notion of Geography in Economics A spatially diverse nation such as Indonesia allows for great variations in the endowment of various provinces and districts and their ability to compete for a greater share of Indonesia s future economic development. Factors such as being blessed with natural resources, connectivity 29 Dr. Ir. Max H. Pohan, CES, MA, Deputy Minister for Regional Development and Local Autonomy Affairs, National Development Planning Agency (BAPPENAS), presenting at a conference entitled Implications of MP3EI on Manpower Planning Jakarta 22 December 2011 Page 30 of 87

31 and quality of infrastructure as well as a conducive business environment can set one province or district apart from the other. The Java Island currently has a considerable advantage over the rest of the archipelago due to better quality of infrastructure, higher levels of density of industry as well as higher availability of skilled labour. Varied Economic Growth in the Regions The economy of the Sumatra region grew by 5.9% (YoY) in 2011, higher than its average growth in the last three years of 5%. This economic growth has largely been supported by increasing performance of the agriculture sector, especially the plantation sub-sector of palm oil and rubber and supported by growth in the manufacturing industry. The performance of the Trade, Hotel and Restaurant sector also grew by 7.5% (YoY). Similarly, economic growth in Java was also high, and in 2011, growth stood at 6.7% (YoY). This growth was supported by the performance of the industry and trade sectors. Export growth was also high in Java- from 16.3% in the third quarter of 2011 to 19.9% (YoY) in the fourth quarter. Such good performance has resulted from an increase in inter-island trading, since Java is one of the agricultural industry and production centres and, thus can distribute its products to other regions in Indonesia. Similarly, growth in Jakarta throughout 2011 reached a high of 6.8% (YoY), higher than the 2010 growth of 6.5% (YoY) with strong consumption indicating the strength of the rising middle class in Indonesia. 30 However, looking at the Eastern part of Indonesia shows another story. Kalimantan, Sulawesi, Nusa Tenggara, Maluku and Papua have had lower economic growth compared to This lower economic growth was mainly due to labour strike and technical problems faced by many mining companies, especially PT. Freeport in Papua. Whilst in 2010 economic growth was at 6.0% (YoY) in 2011 growth was at 5.5.% (YoY). Despite this, many infrastructure projects are attracting investment such as the Ngurah Rai airport and the Sanggaran- Nusa Tenggara toll road, both in Bali. Construction has also began on the Tayan Bridge which connected West Kalimantan to Central Kalimantan. This particular project had required investment of approximately Rp 575 billion. 31 Varied Levels of Investment in the Regions The Investment Coordinating Board (BKMP) has noted that the majority of both domestic and foreign investments have not been equally distributed to all regions in Indonesia, and today most investments are still concentrated in the Java island. This has implications for regional connectivity since there is a well-known problem that the outer regions feel that they are caught in an unfair exchange, since many of their exports go to prop up the development of the Java Island, but receive less back in terms of investments. 32 The Indonesia World Development Report of 2009, illustrated that during the 1970s-1980s some provinces were consistently wealthy (Jakarta, East Kalimantan and Riau) and other provinces were consistently non poor (North Sumatra, Central Kalimantan, West and East Java, Bali and 30 Office of Chief Economist, Mandiri Bank, Indonesia Update, February 2012 p Office of Chief Economist, Mandiri Bank, Indonesia Update, February 2012 p21 32 BKPM website: Regional Champions 2011, BKPM website Page 31 of 87

32 West Sumatra) and others were consistently very poor (Nusa Tengarra, South East Sulawesi and Maluku). 33 However, after the 1980s, export oriented provinces such as Java and Bali grew significantly faster because of export oriented manufacturing with the determining factor being connectivity to global economy. The national media has noted that budget allocations to eastern Indonesia are lacking and stand as a barrier to economic growth and increased livelihoods. 34 Currently, the Java Island reaches 62% (equal to approximately USD 12.3 billion) of the total foreign direct investment and 49% of the total domestic investment. In reaction to this, the BKPM hope to establish the seven Regional Champions in 2012: Nanggroe Aceh Darussalam, West Sumatra, Central Java, West Kalimantan, North Sulawesi, Central Sulawesi and South Sulawesi. This initiative hopes to push for more domestic and foreign investment to Indonesia s regions by rewarding the regions who have attracted investment and provided a good service for its investors. 35 The MP3EI sets out the estimations for investments across the six economic corridors. Most of the domestic and foreign investments are also distributed in the Java economic corridor which amounts to a total of IDR 148 trillion, equal to 59% of the total investment. Finance split up for other corridors is as follows in Figure 8. Figure 8 - Indications of Investment in 6 Economic Corridors Source: MP3EI 33 Consistently wealthy and consistently poor were defined as those close to the national average and those that have experienced a significant change in relative incomes. 34 Jakarta Post, Nusa Tenggara Provinces Need More Investment, 26 th October BKPM website: Regional Champions 2011, BKPM website Page 32 of 87

33 7. Human Resource Development The MP3EI economic development plan envisions an expansion in economic activity and a shift towards higher value added production through improved technological and skilled labour inputs. The desired expansion of existing industries and adoption of new processes, however, will require considerable expansion and adjustments to the labour supply. If the ambitious growth targets are to be realised, the planned output increases for each economic activity that shall contribute to these increased growth rates will have to be met. This will definitely require right human resource mobilisation. At present, Indonesia s education system is not producing enough skilled workers to reach the target levels of development. Moreover, calculations of the output of each economic activity are still lacking as well as the occupation structure of each of them. This lack of information may cause a delay in making the provisions required for educating the workforce. Indonesian training centres are also mismatched with the planned corridor development. 36 Socialising the concept of MP3EI with the training institutions is still an issue. There are still many provincial governments that are still not aware of the placement of the training institutions. Moreover, there is also a lack of political will and commitment among the provincial governments from each corridor in coherently aligning their structures and plans Verbatim Quotes from the Polling Center in response to the question on Human Resource Development as a barrier to implementing the MP3EI.... Another obstacle is the capacity of the human resources which are not yet ready to face the developmental challenges facing Indonesia in the future Government, Jakarta Seminar..The most important barriers are the need to improve the quality of infrastructure and of human resources. We have to be brave enough to provide courses or educate our human resources, at least they should participate activities such as internships or educational training in relation to increasing their knowledge so that when investments enter, they are not only workers, but they can also be individuals that we can form partnerships with.. Government, Kalimantan Seminar The main issue for me is the human resources, as the level of capacity of human resources is the largest factor affecting the progress of a region. If the mindset of the community does not change, then it will be difficult to advance the region.. Civil Society, Lombok Seminar according to the MP3EI. What s more, overall human resource infrastructure is lacking as people from the field of training and education are not yet ready for the implementation of the MP3EI. Weak harmonisation and integration of programmes between institutions is also a serious case. 37 According to the speaker from Ministry of Manpower and Transmigration at the National Seminar in March 2012, the short term and long term plan for every sector must be in place to support the MP3EI in terms of human resource development. Accurate and up to date 36 Taken from the presentation of Abdul Wahab Bangkona (Dirjen Training and Productivity Development; Ministry of Manpower and Transmigration) on Jakarta Seminar, March 14, Taken from the presentation of Abdul Wahab Bangkona (Dirjen Training and Productivity Development; Ministry of Manpower and Transmigration) on Jakarta Seminar, March 14, Page 33 of 87

34 information as well as training centres aligned with the specialisation of each economic corridor are necessary. The Ministry of Education and Culture hopes to increase the number of engineering students. The number of engineering students in Indonesia is comparatively low compared to BRIC countries, South Korea, Singapore and Thailand. 38 As such, increasing the number of polytechnics, academies, and universities as well as improving the quality of training in these institutions are needed if the Indonesian government wants to increase the number of engineering students five-fold by 2025 to keep abreast with an accelerated economic development. Upon transformation of an infrastructure corridor to an economic corridor, determining and addressing potential skill mismatches is the key in generating job creation, higher economic productivity, competitiveness, and high growth in Indonesia. Through the MP3EI, the present pool of human resources is anticipated to meet the needs of all sectors in relation to the main economic activities of each Corridor. In making an effective strategy on manpower planning, policy makers must therefore understand first the development needs of the MP3EI and align these needs according to the academic and vocational training programs, by tailor-fitting the academic programs to the economic potential for each Corridor. Such vocational education programmes should produce skilled graduates that will support the industries for regional comparative advantage. The MP3EI does not contain details of the manpower planning requirements for its implementation. As such, supply side analysis is required to detect skill gaps that exist based on the outlined economic activity in each centre of growth in each corridor. 39 Moreover, quality labour market information must be in place so that people can decide on informed choices about their careers. Many jobs are present in the informal economy or no-contract jobs, which explains the need to strengthen social dialogue to improve access to decent work. Entrepreneurship must also be promoted so that University graduates can become job-creators rather than job-seekers 40. Mapping out the manpower planning needs for Indonesia will be a tremendous challenging exercise as it requires detailed research in all sectors of economic expansion, strong time series data, and substantial methodological capacity. In addition, projections of labour and education requirements based from project outputs are subject to various possibilities in production methods and labour market demand. This is likely to be a complicated process that cannot be carried out alone by the Ministry of National Education (MONE) as it requires the cooperation of other entities such as Bappenas and the Ministry of Finance to develop more accurate forecasts. Moreover, specific forecasts for the conditions of each one of the provinces of economic corridors are also needed. 38 Taken from the presentation of Abdul Wahab Bangkona (Dirjen Training and Productivity Development; Ministry of Manpower and Transmigration) on Jakarta Seminar, March 14, Taken from the presentation of Emma Allen (International Labour Organisation Indonesia) on Jakarta Seminar, March 14, H.E. Dr. Susilo Bambang Yudhoyono, Intenrational Labour Conference on June 14,2011. Page 34 of 87

35 8. Financing and Attracting Private Sector Investment Source: MP3EI p49 Source: MP3EI encourage the private sector to invest in the MP3EI: lack of socialisation of the master plan, the need for regulatory and institutional reform at the national and regional level, lack of sound infrastructure and the need to improve human resources. Lipseya and Sjoholm agree, arguing that a relatively poor business environment, inefficient government institutions, low levels of education and poor infrastructure all seem to be important explanations for the low inflows of FDI to Indonesia. 41 As shown, the MP3EI states that only 10 percent of the required investment needed for the implementation of the six economic corridors will come from the government state budget. The rest is expected to come from state owned enterprises, a mix of sources and at 51 percent, the majority is hoped to the raised by investment from the private sector. A key theme raised during this project was the lack of incentives for the private sector to invest. Others have also argued that the private sector have been relatively uninformed of the formation of the MP3EI, and thus are not aware of the opportunities for investing in the policy. Indeed, it must be considered that all barriers discussed thus far in this paper all contribute to an Verbatim Quotes from the Polling Center in overall barrier which response to the question on the Biggest does not actively Implementation Barriers for the MP3EI.. The biggest barriers that every investor talks about are the lack of regulations and standardised issues..the obstacle is in the regulation, either central or local regulations. Some local regulations are overlapping, they should be synergized and government should be bold in taking actions toward local regulations that need to be adapted. Definitely this will have both positive and negative impacts.. The table below demonstrates the seriousness need for institutional reform in corruption and bureaucracy as the two major barriers which can make private sector investment unattractive. Yet, in 2011 and 2012 Indonesia has seen its credit rating upgraded. In 2011, Standard and Poor s raised Indonesia s bonds to BB+. Moody s followed, upgrading Indonesia to Baa3,..Foremost is the implementation in the operational level on the local involvement in the process, meaning it is not only the state that enters there, but we must address how to strengthen the local involvement so the community can feel the benefits.. All views from members of the Private Sector, Kalimantan Seminar 41 Robert E. Lipseya & Fredrik Sjöholm, Foreign direct investment and growth in East Asia: lessons for Indonesia, Bulletin of Indonesian Economic Studies, Volume 47, Issue 1, 2011 Page 35 of 87

36 from Ba1. 42 Similarly, Fitch ratings have upped their grading to BBB- from BB+, putting the country into investment grade after 14 years. Indonesia remains strong at 46 th place in the World Economic Forum Global Competitiveness Report Furthermore, the government recently announced that there has been an increase of almost Rp 1,000 trillion ($109 billion) committed to the MP3EI, with the energy and transportation sectors attracting the most interest. With the revised pledge figure, by the end of February 2012 investors had committed to investing a total of Rp 4,925 trillion for the MP3EI. 44 This seems to paint the picture that although large improvements are being made, such milestones are fairly recent, and thus it is vital to ensure the private sector of such improvements and commit to the continuation of improving the investment climate. The Transportation Ministry has requested Rp 4.17 trillion in additional funds to complete its projects, in particular developing new river and sea routes that will aid the movement of goods and people. Such links will be vital for lowering business costs and accelerating economic growth. Besides helping develop transportation in less-developed eastern Indonesia, the fund is also to be spent on supporting the development of the MP3EI economic corridors. Figure 9 - Factors for Doing Business in Indonesia Source: Global Competitiveness Report, , World Economic Forum 42 Mamta Badkar, Indonesia Just Got Its Investment-Grade Credit Rating Back, Business Insider, 19 th January World Economic Forum, The Global Competitiveness Report Editorial As MP3EI Blossoms, Resolve Is Needed, March 13, 2012, Jakarta Globe Page 36 of 87

37 Furthermore, official international partnerships have been made. For example, Indonesia and China recently agreed on the establishment of a working committee reflecting China's support of the MP3EI. It is hoped that China will take part in the implementation of the MP3EI, which has been apparently welcomed by Wen, Antara news agency reported. 45 Opinions collected throughout this project found a marked contrast in the perceived roles of implementation and ownership of the MP3EI. Many government officials speaking about the MP3EI noted the importance of the private sector to contribute a large amount of money to finance projects. Many government spokespersons thus argued that the private sector was the main driving force for the implementation of the MP3EI, and that the government role should limited to overseeing the implementation and to provide a conducive investment climate. However, interviews with members of the private sector show a miscommunication in the intended roles of stakeholders for the implementation of the policy. Indeed, the verbatim quotes shown here demonstrate that some members of the private sector view the government as the main driving force for the MP3EI s implementation. Therefore, there is a risk that both groups of stakeholders will expect each other to be the impetus for the MP3EI and as such no group will take full ownership and responsibility for the MP3EI to meet its targets and goals. Verbatim Quotes from the Polling Center in response to the question on the Roles of Government and Private Sector in the Implementation of the MP3EI...Bappenas and Coordinating Minister of Economic Affairs conducts the planning process, APBN will be involved there, so the DPR will also enter at the implementation level, eventually, the debate on the APBN will still take place at the DPR, how far will they be committed? MP3EI is huge, the role of APBN would probably be around 8%, from the private sector 92%... Government Official, Kalimantan Seminar..Definitely the most important actor should be the local government, then also the different associations who represent some communities, say KADIN, APINDO, community groups, and private sector associations, and academics can also provide a neutral opinion Private Sector, Kalimantan Seminar..All parties are very important. The importance of the government is from the aspect of policy making, budgeting and spatial planning. Investment from the private sector is also essential as they are directly involved in the project.. Government Official, Jakarta..The most important role is played by the government, as regulations stem from them. The government formulates the rules.. Government Official, Jakarta Fiscal Decentralisation The increase in fiscal autonomy at the regional level and implicit decrease in fiscal responsibility for the regions at the centre increases the variation..the government, because in a developing country, the government always takes a leading position.. Private Sector, Jakarta in regional fiscal spending according to regional capacity rather than need. In the context of decentralisation, rather than the central government spending national funds equally across the regions or subsidising those in greater need, it becomes incumbent on regional authorities to 45 Jakarta Post, China Agrees to Support Indonesia s Economic Master Plan, 23 rd June Page 37 of 87

38 raise funds to bankroll their own fiscal spending. Government spending in each region is therefore determined by fiscal capacity at the regional level which in turn depends on regional rather than national levels of economic activity. This sees a reduction in inter-regional redistribution of public finances resulting in a failure to counteract the emerging inter-regional inequalities that result from variable economic activity at the regional level. Inter-regional variation in economic activity translates to variation in regional fiscal capacity The existence of variation in economic activity across regions translates (in the absence of centrally enacted fiscal transfers) to variable fiscal capacity at the regional level which can increase inequality where it is sensitive to levels of fiscal spending. Uneven fiscal spending can entrench interpersonal income inequalities, for example, when low income groups are unable to increase their income levels through improved education and health outcomes and when they are vulnerable to income shocks in the absence of social protection mechanisms. Regions receive variable fiscal funds when the capacity of regional authorities to raise funds, primarily from the tax base, is variable. This might vary according to regional comparative advantage such as the extent of urbanisation, the size of the market, natural resource concentration, infrastructure, education levels of the citizenry and so on and according to the economic conditions set by the regional authority in terms of, for example, investment regulation. When decentralisation has been initiated as a result of political concerns to address an uneven distribution of political sensibilities across the country, perhaps derived from concentrations of different ethnic groups in certain areas, the extent of policy variation of this kind across regions is likely. For example, where decentralisation has been enacted to address the economic grievances of minority groups who feel they have been negatively impacted by market functioning, a regional authority might represent their interests by disabling market forces. This could reduce interregional inequality through redistributive state intervention but might increase interregional inequality in the long term by hindering the region s economic growth. 9. Environmental Sustainability Climate change mitigation and the preservation of the environment are two major concerns that arise when looking at this ambitious policy for growth and economic development. Alongside the MP3EI is Indonesia s commitment to reduce carbon emissions. At the G20 Pittsburgh Summit in 2009, President Susilo Bambang Yudhoyono committed to reducing green house gas emissions by 26 percent by 2020 combined with its target of maintaining a 7% per year growth level. However, as yet the MP3EI is not aligned with the target to reduce carbon emissions. The MP3EI policy itself is lacking in a concrete plan as how to increase economic growth whilst being environmentally sustainable. Under the REDD+ initiative, Indonesia will expand the scope of its activities from avoided deforestation and degradation, to include forest restoration, rehabilitation, sustainable management and/or reforestation. Indonesia could earn up to USD $1 billion annually by selling carbon credits to industrialised countries. The World Bank has noted Indonesia s progress towards meeting its target of reducing greenhouse gases, stating that Indonesia is setting an Page 38 of 87

39 example for other countries to follow. Yet, the REDD+ initiative, as one of the most significant ways to mitigate climate change has not yet been integrated into the MP3EI policy. The REDD+ initiative is only mentioned very briefly in the MP3EI itself, and does not specify how to implement the initiative within the MP3EI. Clash with Environmental Sustainability: Kalimantan Issues surrounding Kalimantan s environment in particular were prominent throughout this project. In a meeting with the head of BAPPEDA, East Kalimantan in September 2011, it was discussed that the BAPPEDA staff were concerned that the MP3EI promoted only the extraction of non-renewable resources for the Kalimantan Corridor. The members of BAPPEDA feared that if the region does not move towards value-added goods there will be a risk of economic shock when resources run out. During the first seminar in Balikpapan, East Kalimantan, the theme of environmental sustainability was raised as a particular concern for the implementation of the Economic Corridor. Arie Rompas, Executive Director of WALHI, Central Kalimantan put forth his opinion that a development model that still relies on natural resource extraction ignores environmental sustainability and causes ecological damage in Kalimantan. Climate Change Mitigation and the MP3EI Seminar The third seminar in this project looked specifically at aligning climate change mitigation with the MP3EI. On Wednesday 8 th and Thursday 9 th February 2012, the third seminar was held in Jakarta to discuss how to align environmental sustainability with the MP3EI. A total of 85 people attended this two day event, including participants from across Indonesia s regions as well as one special international guest, Dr. Vlasios Voudouris from the London Metropolitan University. Key findings from this Seminar are as follows: Ir. Sulistyowati, MM. (Assistant Deputy Minister for Climate Change Mitigation and Atmospheric Function Preservation, Ministry of Environment of Republic of Indonesia) noted that so far, Indonesia has made progress to support climate change mitigation for example the President s target to reduce carbon emissions by 26%. To support the implementation of this plan, the government has conducted a preliminary inventory of all economic daily activities from the lower level of government institutions such as the district level. Among various sources of carbon emission, the forest and peat land accounts for about 60% of the emission in Indonesia which means that the emission from this sector is substantially high. Dr. Endah Murniningtyas, M.Sc., Deputy Natural Resource and Environment, BAPPENAS noted that the Greenhouse Gas National Action Plan consists of core activities, integrated among sectors, to reduce emissions and support activities to strengthen policy framework. The six economic corridors in the MP3EI Policy should be implemented across 33 provinces and it is better for each provincial government to prepare their own formulation of their GHG action plan. To smooth the implementation of the plan, each ministry and government institutions should have consultations with their branch offices in the regions in order to arrange and formulate the regional action plan (RAD GRK). Furthermore, the plan could be cemented by implementing it as a Governor decree. For all 33 provinces, RAD GRK is a communication tool among regions and also between regions and the central government. The government should realise that socialisation is key for the long term development of the plans. Page 39 of 87

40 Dr. Ir. Kirsfianti L. Ginoga, M.Sc., Head of Research and Development Center for Climate Change and Policy, Ministry of Forestry stated that REDD+ and other methods to mitigate against climate change need to be integrated with the MP3EI. Reducing emissions from forestry is so important in Indonesia because approximately 80% of the country s total emissions come from this sector. REDD+ should also be prioritised in certain parts of Indonesia such as the primary forest in Papua, Sulawesi and Kalimantan. The strategy of MP3EI and GHG NAP must be translated into land based mitigation in sectoral and at the regional level and programmes and activities in each sector must be clear and operational for every location. Nyoman Iswarayoga, Climate and Energy Program Director, WWF Indonesia argued that the MP3EI has neglected environmental sustainability. Therefore, considering that there are still forested areas in Indonesia, such as Kalimantan, it would be a good step if we could create a green zone for conservation. It then leads to an initiative of implementing Green MP3EI where there should be better management practices in agriculture and plantations, improving spatial urban planning where it can be used as a reference in the development and the government should strictly implement the approved spatial planning, Green Business Initiative, and Green Infrastructure Development. Dr. Daniel Murdiyarso, a Senior Scientist from CIFOR argued that in the Kalimantan Corridor, according to an analysis on Indonesia s forest moratorium, implementing REDD+ will not be enough to meet the targets to reduce greenhouse gases. There should be multi-sector efforts to prepare a strong regulatory framework and law enforcement in order to integrate REDD+ into the MP3EI. If we look at the Kalimantan Economic Corridor, the region s theme is dedicated for a centre for the Production and Processing of Mining Goods and National Energy. The region has various challenges in reducing its carbon emissions because the capacity for storing the carbon is fairly small since reforestation is not the solution for reducing emissions. The ever expanding oil palm plantations in Kalimantan are a huge challenge. Prof. Dr. Daddy Ruhiyat, Executive Director of Climate Change Board, East Kalimantan stated that the East Kalimantan region has been identified as region with the highest carbon emissions. The forestry and palm oil sectors are the biggest contributors to these emissions. Since the MP3EI promotes the forestry and palm oil sectors as well as other sectors using non renewable resources such as coal, the MP3EI in the Kalimantan Corridor does not promote environmental sustainability. It is not clear how the MP3EI intends to work towards lowering environmental sustainability in the Corridor. Similarly, Benja Victor Mambai from WWF, Papua, spoke of the problem in connectivity in Papua due to underdeveloped infrastructure. In the future through MP3EI, it is hoped that there will be an increased number of infrastructure projects to fulfill this need. In order to do so, the local government has prepared to improve spatial urban planning towards a goal of making Papua more sustainable in their economic development. Ir. A. A. Bagus Sudharsana, Dipl. PLG, Head of the Denpasar Environmental Agency, Bali, stated that actions have also been integrated into the Spatial Plan, however this has yet to be Page 40 of 87

41 implemented. The local government wants to work on mitigating climate change also because they intend for Bali to be a tourist attraction for the long term. The local government also intends to pay special attention to indigenous wisdom throughout the implementation of the programmes. The areas already to be investigated are air and water pollution as well as traffic congestion. It was argued by Heru Prasetyo, Deputy I, UKP4 as well as Dr. Rob Daniel Technical Advisor, PT PricewaterhouseCoopers Indonesia Advisory that environmental sustainability in the regions must actively involve local communities. Heru Prasetyo also discussed that the commitment to reduce carbon emissions is not well supported due to unreliable data of the carbon warehouse or land coverage among ministries. At the same time the regulatory framework needs to be reviewed, in the sense that it should overcome the problem of overlapping regulations. Dr. Dodik Nurrochmat, Center for Climate Risk and Opportunity, in South East Asia Pacific (CCROM SEAP) argued that there are not enough financial incentives for stakeholders to change trajectory and move to environmental sustainability. The national government needs to assess what financial offers can be made. Box 1 - Key Points from the Low Carbon Economy Knowledge Hubs This project also involved organising two Low Carbon Economy Knowledge Hubs, one in February 2012 and one in March 2012 to discuss how to implement a low carbon economy in Indonesia. Key themes and conclusions from these two sessions follow. Participants list for these events can be found in the Annex. First Low Carbon Economy Knowledge Hub Presidential Decree No. 3/2012 was passed on the Spatial Plan of Kalimantan. In this regulation, the government confirmed that Kalimantan should maintain at least 45% of the land as forest. However, members of the Low Carbon Economy Knowledge Hub argued that in Kalimantan there is currently no scientific based research underlying the figures stated by the President both for the carbon emission reduction and also for the forested areas. Regarding the socialisation programme of Low Carbon Growth Strategy (LCGS) conducted in 14 districts, research has found that most of the districts are not ready to implement the Spatial Plan. A general lack of enthusiasm and low public awareness was a common theme when the LCGS team visited the 14 districts to introduce the Spatial Plan. There should be a particular mechanism that might attract societies environmental awareness so the public can also contribute to the program. Thus, even though the concept is ready to be put on the ground, the implementation is currently delayed. Regarding the Presidential Regulation No. 71/2011 and Presidential Regulation No. 61/2011 about Greenhouse Gas Emission National Action Plan (GHG NAP) or RAN GRK, there is still an institutional problem across provinces and regions in Indonesia. There should be working units for 5 sectors (forestry and peat land; agriculture; energy and transportation; industry and waste) in each province. However it is unlikely that each working unit is ready to implement activities stated on those government regulations. Page 41 of 87

42 Second Low Carbon Economy Knowledge Hub Many expected that when the government made a commitment to reduce carbon emissions by 26%, that the government had already prepared funding allocation. In addition, if there is international funding available, the carbon emission reduction will increase by 41%. Stakeholders at the Hub noted, however, that it is likely that the financial disbursement scheme will be unclear and unprepared. The government expects that the general public should also take part in the government programs in reducing carbon emissions. However, the government needs to make clear the funding and financial disbursement in order to attract the participation of stakeholders. There should be a safeguard mechanism and monitoring scheme to oversee the funding allocation. In addition, the community should also be a part of the monitoring scheme. The public and particularly indigenous groups need to be aware of the incentives that they will receive, but also that when they do receive incentives it is for the purpose of preserving the biodiversity of the forest, which in the end also serves to benefit themselves. The differences between carbon mitigation and carbon sequestration need to be made clearer and socialised to the general public, as there is confusion between the two. Since moving to a Low Carbon Economy is still in its infancy, the first step should be work on capacity building for carbon market readiness not only in mitigation but adaptation. Moving to a low carbon economy needs to be integrated into the MP3EI and thus the MP3EI needs to be adapted to include low carbon strategies which complement economic growth. The forestry, industry, tourism and fisheries sectors should made priorities. Page 42 of 87

43 Differing Perceived Opportunities and Barriers to Implementing the MP3EI at the National Level and in the Kalimantan and Bali- Nusa Tenggara Corridors. Data collected from The Polling Center has shown that perceived opportunities and barriers at the national level as compared to the Kalimantan Corridor and Bali- Nusa Tenggara Corridor level generally do not stray too far from common themes. Despite this, however, there are different emphases at the national level than at the regional level, as well as key differences between the social, political and economic make up of the Kalimantan and Bali- Nusa Tenggara Corridors. With each of the six Corridors having a unique set of comparative advantages, the MP3EI has built upon these sets of regional characteristics to create unique themes for each corridor. Thus it follows that since each Corridor has a different emphasis on economic activity, levels of poverty, levels of capacity of human resources and infrastructure, each Corridor is likely to have a different set of requirements for its implementation. The next section will discuss the differing implementation requirements at the national level and for the Kalimantan and Bali- Nusa Tenggarra Corridors. Below shows the differing perceived opportunities and barriers to implementation derived from the three rounds of interviews carried out by the Polling Center in Jakarta, Kalimantan and Lombok. Figure 10 - Perceived Opportunities at the National Level Increased Levels of Investments Developed Infrastructure Envrionmental Protection Improvements in the Social Economy Figure 11 - Perceived Barriers to Implementation at the National Level Lack of Planning Unclear Spatial Plans Lack of Coordination and Socialisaiton Limited Flexibility for the Private Sector Underprepared Human Resources Lack of Coordination Between Government and Private Sector Overlapping Regulations Page 43 of 87

44 Figure 12 - Perceived Opportunities in the Kalimantan Corridor Investment in Infrastructure Increased Value Added Products Increased Capacity of Human Resources Job Creation Reduction of Regional Disparities Figure 13 - Perceived Barriers to Implementing the Kalimantan Corridor Lack of Syncronisation between Regulations at the Central and Regional Level Environmental Damage Risk of Corruption Underdeveloped Infrastructure Lack of Financing Potential Resistance from the Local Community Lack of Connectivity Within the Four Regions of Kalimantan Indigenous Rights are Not Taken into Account Too Much Reliance on Unrenewable Resources Page 44 of 87

45 Figure 14 - Barriers in the Kalimantan Corridor broken down by frequency of mention: Mentioned by Government, Private Sector and Civil Society: Lack of Socialisation Risk of Corruption Mentioned by Government and Private Sector: Lack of Syncronisation between Regulations at the Central and Regional Level Underprepared Local Government Mentioned by Private Sector and Civil Society: Potential Conflict with Indigenous Groups Mentioned by Government and Civil Society: Underdeveloped Infrastructure Underdeveloped Human Resources Mentioned by Government Only: Unequal Funding between the Regions Figure 15 - Perceived Opportunities in the Bali- Nusa Tenggara Corridor Increased Investor Relations Investment in Infrastructure Increase in Tourism and Food Security Job Creation Increase in Micro Entrepeneurism Growth Potential of Marine Sector Page 45 of 87

46 Figure 16 - Perceived Barriers to Implementing the Bali- Nusa Tenggara Corridor Low Awareness of the MP3EI Unsupportive Regulation Small Regional Allocation Fund Underdeveloped Infrastructure Underdeveloped Human Resources Lack of Technology Cultural and Local Customs which could Clash with the Tourism Sector Incomplete Operational Procedures Lack of Incentives for Private Investment Figure 17 - Barriers in the Bali- Nusa Tenggara Corridor broken down by frequency of mention: Mentioned by Government, Private Sector and Civil Society: Underdeveloped Infrastructure Underdeveloped Human Resources Mentioned by Government and Private Sector: Low Awareness of the MP3EI Unsupportive Regulation Lack of Incentives for Private Investment Mentioned by Private Sector and Civil Society: Imcomplete Operational Procedures Mentioned Only by Government: Lack of Technology Small Regional Allocation Fund Mentioned Only by Civil Society: Cultural and Local Customs which could clash with the Tourism Sector Page 46 of 87

47 Implementation Requirements and Recommendations for the MP3EI During the National Level Seminar on March 14 th, Dr. Prasetijono MJ, M.A, Deputy of Economy, National Development Planning, BAPPENAS stated that he views the MP3EI as a living document that requires inputs and even criticism. As a living document, plans for implementing the MP3EI are not completely resolute. The following section will analyse a plan for implementing the MP3EI at the national level as well as looking specifically at the requirements for the Kalimantan and Bali- Nusa Tenggara Corridors. Firstly, this section will look at the international experience of implementing economic corridors and lessons will be drawn for the Indonesia experience. Roles of stakeholders and levels of preparedness will also be assessed before making final recommendations. International Experience of Implementing Economic Corridors A Closer Look on East-West Economic Corridor of Greater Mekong Sub-region (GMS): Turning Infrastructure Corridors into Economic Corridors A decade after the launch of the East-West Economic Corridor (EWEC), the Corridor has established many of the targeted infrastructural benchmarks. A holistic approach has been adopted in developing a cost-effective strategy of placing an efficient transport system for the movement of goods and people in the subregion while improving telecommunications, energy infrastructure, tourism as well as a contributory policy and regulatory environment that encouraged private sector involvement and development. Twelve flagship projects are classified under two categories of transport and other infrastructure and are managed by various working groups. Stages of EWEC Implementation Stage 1: EWEC Transport Corridor Similar to the MP3EI, the initial stage of the EWEC has focused on the establishment and improvement of transport facilities and Box 2 : EWEC Flagship Projects A. Core Transport (1) East West Transport Corridor (2) Water Transport Development (3) Railway Development (4) Air Transport Development (5) Cross-border facilitation in the movement of people and goods (6) Human resource development for the transport sector B. Other Infrastructure (1) Development of electric power grid (2) Promotion of regional energy cooperation arrangements (3) Telecommunications backbone development (4) Tourism development (5) Economic corridor Initiatives (6) Initiatives of the Ministry of Economy, Trade and Industry (ASEAN-METI), Economic and Industrial Cooperation Committee (AMEICC), and Working Groups on West-East Corridor Development infrastructure to efficiently move goods, services, and people across country borders. Improvement on such was considered to be important in placing linkages along the corridor. Connecting the physically linking areas in the eastern portion of the corridor has been achieved with the assistance from the ADB, JICA, and the Japan Bank for International Cooperation Page 47 of 87

48 (JBIC). In the western portion, plans are outlined for the completion of the Mawlamyine to Myawaddy section of the highway with the support from Government of Thailand. Technical Cooperation for the EWEC transport corridor has been provided much by the ADB whilst JBIC has been the dominant source of financing the infrastructure construction. JBIC has accounted for about 80% or almost $900 million of the EWEC s overall transport infrastructure. Stage 2: EWEC Economic Corridor The second stage of the corridor s development focused on poverty reduction, development of rural and border areas, improvements on the wages of the low income and vulnerable groups, promotion of tourism along the corridor, and provision of jobs for women. These projects are being financed by international, regional, bilateral donors, development partners but ADB is in the forefront of development financing. Technical support however is being supported by both the ADB and Japan s ERIA for the development of special economic zones (SEZs) along the corridor. Tourism initiatives are also active with the Mekong Tourism Development Project (MTDP) and the East-West Economic Corridor Tourism Project. Development Challenges Although the major infrastructure components of the EWEC have now been realised and that the development of EWEC has involved much progress in facilitating trade, improving networks of transportation, and promoting private and tourism industries, consensus is still lacking among government, development partner officials, private sector, and other stakeholders on converting the transport corridor into an economic corridor 46. With this, Indonesia can take advantage to learn from and avoid the hurdles in the EWEC economic corridor transformation. The slow pace of transforming the transport corridor into a fully-fledged economic corridor is attributable to some critical issues: 1. Cross-border investment liberalisation regulations 2. Agribusiness development 3. Financial schemes for business operations along corridor 4. Infrastructural improvements in gateway nodes 5. Secondary roads to let the rural communities pass through the main artery of economic corridor 6. Services on business development for small and medium enterprises along the poorer areas of the corridor 7. Management of tourism initiatives and projects at both the national level and across the EWEC countries 8. Infrastructural services and road access to tourist spots 9. Model or benchmarks to assess the performance and progress in achieving the goals that have been established for the EWEC. 46 Asian Development Bank, 2010, Strategy and Action Plan for the Greater Mekong Sub-region East-West Economic Corridor Page 48 of 87

49 Accomplishments and Lessons from the EWEC Implementation The major accomplishments of the initial strategy and action plan outlined in the 2001 Pre- Investment Study are accountable to those that have been covered by the Cross Border Trade Agreement (CBTA), the GMS tourism sector strategy, and the GMS Business Forum. To date, only about one-sixth of the policy, project, programme, and institutional projects have been implemented and about one-sixth have been partially implemented or are in the process of implementation. A number of cross-border investment liberalisation policies, programmes, and agribusiness projects; information systems on trade flows and cross border-investments; financial schemes to support business operations along the corridor; port improvements in the gateway nodes; and business development services for micro and small-sized businesses along the corridor areas are amongst the initiatives that have not been implemented. The following are the lessons learned from the EWEC 2001 Strategy and Action plan 47 : 1. Rather than implementing wide-ranging initiatives, a few targeted initiatives comprising of well-defined areas are more likely to be easily implemented. 2. Successful realisation of cross-border investments was hindered by problems in (i) good governance and corruption, (ii) existence of adequate infrastructure, (iii) clear and responsive policies on foreign investment, (iv) the establishment of well-functioning industrial zones, (v) the integration of small and medium enterprises into value chain activities along the poorer areas of the EWEC. Moreover, activities related to private sector promotion were carried out by the GMS Business Forum. 3. There are remaining difficulties in evaluating the EWEC performance in terms of its impact on cross-border economic activity due to data limitations and lack of transparency. Moreover, there is an absence of benchmarks and standards for assessing the performance. As such, it remains challenging for member countries to develop ownership, oversight, and accountability on the progress of turning the EWEC into an economic corridor. 4. The EWEC developments have strong linkages to National Development Plans and provincial development strategies of all member countries. It is viewed as a key strategy for national and regional development. This ownership however needs to be integrated into the new strategy and action plan both in terms of how implementing mechanisms are formed and in terms of establishing benchmarks and performance measures. 47 Asian Development Bank, 2010, Strategy and Action Plan for the Greater Mekong Sub-region East-West Economic Corridor Page 49 of 87

50 Figure 18 - EWEC Linkages to National Development Plans Source: Asian Development Bank Strategy and Action Plan for the Greater Mekong Sub-region East-West Economic Corridor 5. Reduction of border costs is important as much as developing EWEC physical infrastructure because connecting inter-country provinces with highways is not sufficient to facilitate the movement of goods and people. To maximise the benefits of infrastructural developments, reductions in border costs must take place to fully affect the potential impact on the geographic distribution of populations, raise income levels, and boost development of industries. 6. Creating partnerships can be challenging as opportunity gaps still exist (i) between public and private sectors, (ii) in establishing economic activities across borders, (iii) in value chains, (iv) and among development partners and NGOs. 7. Formulating comprehensive plans and roadmaps is still not a mainstream practice that is why there is a need for improving a holistic master plan approach for every sector and across sectors (i.e. linking support sectors with leading sectors). 8. The lack of adequate statistical information made it difficult to assess progress and achievements of the EWEC over the last ten years on the transformation of the transport corridor into an economic corridor. Investment and cross-border trade data are difficult to get hold of. Where available, it would definitely identify bottlenecks to further progress and improve monitoring and evaluation of achievements. An effective monitoring and evaluation framework for the EWEC containing benchmarks and quantifiable targets is greatly needed and must be provided on a yearly basis by the various sector working groups. Impact indicators must also be available as part of the evaluation reports and must be submitted to the ECF and the GMS leadership. Page 50 of 87

51 The Indonesia-Malaysia-Thailand Growth Triangle Established in 1993, the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT) sub-regional economic cooperation aims to accelerate the economic transformation of the member states and provinces in the three countries by maximising their complementarities and comparative advantages. The IMT-GT Roadmap set the vision of a seamless, progressive, prosperous, and peaceful sub-region with improved quality of life. The Roadmap comprises of both a framework and an action plan to steer economic cooperation over a five-year period. It also provided five strategic thrusts, namely: (i) to facilitate and promote intra- and inter-imt-gt trade and investment; (ii) promote the growth of agriculture, agro-industry and tourism; (iii) strengthen infrastructure linkages and support to the integration Box 3 IMT-GT Five Connectivity Corridors a) Extended Songkhla-Penang-Medan Corridor (Nakhon Si Thammarat Phattalung Songkhla Yala Pattani Penang Medan); b) Straits of Melaka Corridor (covering the western coastal belt from Trang in Southern Thailand to Melaka in Peninsular Malaysia); c) Banda Aceh-Medan-Pekanbaru- Palembang Economic Corridor (a road corridor running south to north through Sumatera); d) Dumai-Melaka Economic Corridor (a maritime corridor linking Sumatera and Peninsular Malaysia); and e) Ranong-Phuket-Aceh of the IMT-GT sub-region; (iv) develop human resources and skills competencies, enhance mobility of labour, and strengthen environment and natural resource management; and (v) strengthen institutional arrangements and mechanisms for cooperation, including public private sector collaboration, participation of stakeholders at the local level, and the mobilisation of support from development partners. Projects and activities under the Roadmap are classified under clusters, namely, (i) a policy and regulatory anchor, which is aimed at providing a sound policy and regulatory environment to private sector activities in the IMT-GT region; (ii) and an anchor of major IMT-GT connectivity corridors from which development will spread out to neighboring areas through transport and economic linkages. Overall Assessment of IMT-GT In the past 15 years, the IMT-GT has achieved progress in terms of maintaining the economic exchanges and commercial ties among the participating states and provinces. Because of the private sector s active participation and well-functioning business networks, trade and investment have boosted in the sub-region. The IMT-GT Roadmap has clearly outlined a long term vision, five strategic thrusts, 37 flagship projects and more than 50 measures, programs and projects. However, there is a weak linkage between strategic thrusts and actual projects. The strategic thrusts have not been converted into a mass of interrelated projects that could make a considerable impact on the IMT-GT goals since it is often argued that there are too many flagship programmes which are not well-conceived. There are fundamental weaknesses in structures, capacities and processes of IMT-GT cooperation reflected in its lack of capacity for program and project formulation. One obvious Page 51 of 87

52 problem is the lack of comprehensive studies in other sectors of cooperation that could have identified development gaps to serve as a basis for making programs and projects. Comprehensive and analytical studies have only been done on the connectivity corridors, maritime transport, logistics development, and opportunities for the transport sector. Project proposals evaluated and approved at the working groups are largely randomly considered, making the working groups to lack direction and control. Moreover, many recommendations from the analytical studies on connectivity corridors have not been mainstreamed into both the Government and Joint Business Councils (JBC) groups. There is also a weakness in secretariat support both at the national and sub-regional levels that worsen the difficulty of effective project identification and formulation. Lessons from the IMT-GT Implementation 1. The preliminary step for making the Action Plan Matrix more efficient has been conducted but the improvement of Action Plans has to be enforced more intensively. Specifically, the APM needs to be further developed and must be well thought-out and logically ordered with strategic projects in order to accomplish sector goals. Moreover, clearer information on the scope and benefits of the projects is needed to assess the projects results and impact more accurately. 2. The sector strategies that have been assumed by the Working Groups should be maintained to guide further work on the Action Plan Matrix. Working Groups should be given the chance to expand their appreciation and ownership of the sector strategies as a foundation for project formulation by way of broad-based and inclusive sector forums. These forums should produce project concepts that can lead to a more disciplined and well-informed process for devising projects to be included in the blueprint. 3. Detailed and well-structured financial schemes and implementation plans are necessary to guarantee effective and efficient implementation of projects. A project follow through mechanism must take in place to allow keen monitoring of all the aspects of project implementation inputs, through-puts and outputs and to assess issues and constraints that hinder smooth project implementation. To facilitate project coordination and monitoring properly, an electronic based system must be set up for updating, monitoring, and providing access to information on the APM. 4. An inclusive, well-informed, detailed, and deliberate connectivity corridor action plan must be in place and must include its software and hardware components. It should have a clear time frame, realistic goals, and most importantly a detailed financial plan. The process of formulating the corresponding action plans should involve the Government agencies both at the national and regional level as well as the private sector groups (i.e. SMEs, freight forwarders, banks) and future development partners. Page 52 of 87

53 5. A new business model for the IMT-GT must be adopted different from that of ASEAN. The model should have the following features, namely, (i) a public-private sector component in Verbatim Quotes from the Polling Center in response to the question on the Main Drivers all phases of planning, programming and of the MP3EI. implementation; (ii) a distinct separation of the program/project formulation and implementation..the private sector. The reason bring that functions into working entities with clear the government does not have the funds. It is accountabilities; (iii) wide involvement of key true that the policy and decision maker is the stakeholders (including the local governments) in government, but the investors are the private these working entities; (iv) a project-based organization of working units rather than sectorbased; sector, and so the government is merely the facilitator (v) a professionally-run regional Private Sector, Kalimantan Seminar secretariat. The Implications of International Experience for the MP3EI Experiences of economic corridor development from the EWEC and IMT-GT offer some lessons for the MP3EI. The first is on the importance of model or benchmarks in assessing the implementation progress that have been established in the MP3EI. Second is on the role of an effective regulatory framework to facilitate the movement of goods and people across economic growth centers and of the capacity to implement and enforce it. Third is on the usefulness of adequate statistical information and an evaluation framework to assess the achievements for every implementation phase. Impact indicators must also be available as part of the evaluation reports and must be submitted to the main implementing body of the MP3EI. Fourth, detailed and well-structure financial schemes and implementation plans are necessary to guarantee effective and efficient implementation of initiatives. Lastly, an Action Plan Matrix (APM) must be in place and has to be carried forward more intensively. The APM has to be well-thought out, logically sequenced, and must include the strategic projects to achieve sector goals... Maybe since I come from private sector I tend to choose more neutral individuals, I will not give it to the local government but to the local community leaders instead, or in the private sector, or maybe when we talk about neutral academicians, it should really be obvious that this group is clearly impartial and possesses a strong character.. Private Sector, Kalimantan Seminar Specifically in the local areas the information should focus on the regional government, the center of information should be there, in this case is the Bappeda. In my opinion there should be some kind of MP3EI center at the provincial level therefore, there is no need to go to the central. Only one person is required to go to the central, which should just be the Bappeda. Private Sector, Kalimantan Seminar.. Actually it is the role of local government. The central government is responsible for strategic policies and the regional government should be responsible for what is applicable in each region.. Government Official, Kalimantan Seminar..Civil society, entrepreneurs and the private sector. They are the implementers, and the local government should facilitate that.. Private Sector, Kalimantan Seminar..I believe all have important roles, if one of them does not play its role, this will also influence the speed of this program.. Government Official, Kalimantan Seminar Page 53 of 87

54 Roles of Stakeholders in the Implementation of the MP3EI Data collected during the interviews shows that overall, the government was seen to play the role of facilitator that is by creating and maintaining the rules and regulations which will shape the progress of the policy. The private sector was seen as the engine, since the majority of the investment needed to support the policy is expected to come from private investment. Civil society organisations were seen to be a third party, to assure that other actors maintain their responsibilities as well as to represent and encourage community empowerment, such as Kalimantan s many indigenous people and endangered species. However, verbatim quotes from the Polling Center on the perceptions on main driver for the implementation of the MP3EI show a mix of responses from stakeholders below the surface of the overall theme. This lack of a clear knowledge of stakeholder roles in implementation is surely a barrier to a smooth process of implementation. A lack of clear cut roles may lead to a duplication of undertaking of tasks or a delay in targets being met due to one set of stakeholders relying on the impetus of others. An important point that has already risen in the barriers section on financing and private sector investment discussed the mismatch between the perceived roles of the private sector and government. This is especially poignant due to the fact that long term trust and collaboration is necessary in building foundations for increased private investment in the MP3EI. Many of the government officials both at the regional and national level saw the private sector as the main driver, whereas at the same time many members of the private sector saw the government as the central force for implementation. The government cannot expect to wait for investments to roll in before it takes the lead in ensuring targets for basic infrastructure are met, regulations are reviewed and the investment climate is improved. Continued Verbatim Quotes from the Polling Center in response to the question on the Main Drivers of the MP3EI....Trust it to locals, the central is only the coordinator, not the decision maker.. Civil Society, Kalimantan Seminar..Bappeda and also local KADIN. I completely agree on the involvement of 3 main groups of actors, first the government, the private sector and civil society. The civil society has a lot of initiatives in community empowerment Civil Society, Kalimantan Seminar it must indeed be the government that should run the program because it is within the context of the state, including the investments, those who regulate investments should have a huge authority in managing this project Civil Society, Kalimantan Seminar Page 54 of 87

55 Current Structure of the KP3EI The Committee on Economic Development Acceleration and Expansion of Indonesia (abbreviated KP3EI) is an institution which was established by the President of the Republic of Indonesia on May 20, 2011 to coordinate the implementation of MP3EI. The institute is established under Article 4 of Presidential Decree No. 32 Year The tasks of the KP3EI tasks are as follows: to coordinate the planning and implementation MP3EI, to monitor and evaluate the implementation MP3EI, to outline the steps and policies in the context of solving problems and barriers to implementation MP3EI. The structure of the MP3EI implementation committee consists of an Implementation Team, Working Team, and a dedicated and professional Secretariat with the following explanations: 1. The Implementation Team consists of: Ministers, the Chairman of Non Ministerial Institutions, and representative agencies that shall contribute to the implementation of MP3EI. The Implementation Team is responsible for providing general guidance, approving strategic decisions, and solving strategic issues which may arise during the implementation of MP3EI. 2. The Working Team shall consist of high ranking officials (echelon 1), and key officials from relevant agencies who will be involved in the implementation of MP3EI action plans. The Working Team is responsible for coordinating the implementation of investment projects and infrastructure projects. This team will act in collaboration with relevant agencies, and is also responsible for solving inter-ministerial problems and ensuring government support for the implementation of MP3EI. 3. The Secretariat is a dedicated and full time supporting team that is responsible for developing a monitoring and coordinating system for progress of MP3EI s implementation. The secretariat will actively support the Implementation Team and Working Team by providing them with a clear analysis and technical proposal to overcome the problems arising from daily monitoring. 48 An organisational chart to show the national KP3EI structure can be found in the Annex of this paper. The fact that the KP3EI is chaired by the President of the Republic of Indonesia and the KP3EI Secretariat is chaired by the Coordinating Minister for Economic Affairs of the Republic of Indonesia shows that the national government has shown leadership and responsibility for the implementation of the MP3EI. 48 Yahoo Group on the KP3EI Page 55 of 87

56 The limitation of the current system is that the majority of stakeholders involved both and the national and regional level are mainly government officials. For instance, the member list for the Bali- Nusa Tenggara MP3EI Working Group below shows that out of the 17 members, 9 are from government institutions, and the rest are prominent stakeholders in the private sector. As such, there is a lack on inputs from civil society at large. Members of the Bali- Nusa Tenggara MP3EI Working Group 1. Deputy for Coordination of Macroeconomics and Finance, Coordinating Ministry for Economic Affairs 2. Deputy Head of Development Performance Evaluation, National Development Planning Agency 3. Director General of Tourism Destination Development, Ministry of Culture and Tourism 4. Director General of Animal Husbandry and Animal Health, Ministry of Agriculture 5. Director General of Fisheries, Ministry of Maritime Affairs and Fisheries 6. Director General of Foreign Trade, Ministry of Commerce 7. Director General of Water Resources, Ministry of Public Works 8. Expert Staff and Institutional Law, Coordinating Ministry for Economic Affairs 9. Christianto Wibisono, one of Indonesia s leading economists and commentators- founding director of Global Nexus Institute, a think-tank advising government on geopolitical and economic issues. 10. Juan Permata Adoe, Deputy Chairman for Fisheries and Farming, KADIN, Jakarta 11. Johnny Darmawan, President Director of PT Toyota Astra Motor (TAM) and Chairman of the Association of Indonesian Automotive Industries (Gaikindo) 12. Gede Suwardana Linggih 13. Barry Djadid, Head of KADIN, Lombok 14. Paul Lyanto, Council Member of the Provincial Government of Nusa Tenggara Timur. 15. Saharudin Didu 16. Meidya Amoraldham 17. Ahmad Bakri Putra 49 The above information on the KP3EI regional working groups is not easily available to the public. One recommendation would be to increase transparency on information such as this so that any interested stakeholders can easily access up to date information. During a Polling Center interview, one stakeholder from the national government suggested the formation of a regional KP3EI Working Group as part of the implementation process, thereby implying that they were unaware of the already existing Working Groups in each Corridor. Furthermore, it is advised that these Working Groups also open up to larger breadth of stakeholders as in line with the Not Business As Usual mind-set which the MP3EI seeks to create by increasing collaboration and inputs from a variety of stakeholders. 49 KP3EI Yahoo Groups Page 56 of 87

57 Level of Preparedness Since socialisation and awareness of the roles of stakeholders in implementing is limited, it follows that stakeholders are likely to be underprepared in playing an active role in implementation. There seems to be a mismatch of communication between the national and regional governments. Awareness of the MP3EI was found to be much higher at the national level, and thus government officials on average felt that they were prepared to implement the policy. In the government category, all respondents in Polling Center interviews felt ready to implement the MP3EI but respondents at the regional level stated that they felt inadequately prepared. A good level of preparedness was indicated by the commencement of intensive meetings with work groups. Despite this, there were also some respondents that stated that the government, at both the central and regional levels, was unprepared and the same held true for the private sector. Looking at the experience of the Indonesia- Malaysia- Thailand Growth Triangle shows that time was easily spent on studies and implementation plans for connectivity corridors, maritime transport, logistics development and opportunities for the transport sector, but what was significantly lacking was a similar dedicated plan to a study on working practices for the implementation. Verbatim Quotes from the Polling Center in response to the question on the perceived level of stakeholder preparedness to implement the MP3EI. based upon what I have seen so far, with the onset of intensive meetings with corridor work groups, everyone acknowledges the intentions of MP3EI are already good Government Official, Jakarta For the government, I have to say it is low. And Indonesia s business is not ready to compete with the outside world Private Sector, Jakarta..actually, both the central and regional governments are wholly unprepared and this extends to their affiliates... Civil society, Jakarta To formulate an implementation institution with focus only on implementing the set development activities under the MP3EI is only half the story. At the same, the KP3EI Secretariat the Working Groups at all levels should be well considered in its membership, and good management working practices should be laid at the start and be adhered to. Sequencing Barriers to implementing the MP3EI at the national level compared to the Kalimantan and Bali- Nusa Tenggara Corridors have shown to be different from one another. As such, recommendations for the two regional corridors are different from each other as well as different from the general recommendations for the national level. This indicates that each Corridor will be unique in its implementation. Indeed, the MP3EI states that each corridor will be unique in that each has its own theme based on the comparative Page 57 of 87

58 advantage of that region. Furthermore, implementation relies on a number of factors such as levels of infrastructure, human resources, institutional capacity, amongst others which all vary from region to region. As such, it is likely that the implementation experiences from one Corridor cannot be copied to another. This suggests then, that the idea of using a pilot corridor should not be undertaken, but instead all six corridors be implemented simultaneously. Implementing the first phase of the MP3EI should occur at the same time as increased research and planning to develop human resources, invest in science and technology, developing basic infrastructure as well as a regulatory and institutional reform. Similar to the East- West Economic Corridor of the Greater Mekong Delta Sub- Region, the MP3EI has dedicated the first phase of the implementation process from 2011 to 2015 as solely in investing infrastructure. The purpose behind this is to increase the inter-corridor connectivity and set basic foundations for the second phase. The EW Economic Corridor found relative success in the infrastructure phase, and significant increased trade and investment flows were increased as a result. However, difficulty was found in the move from an infrastructure corridor to an economic corridor. For the second phase of the MP3EI, attention needs to move further down to the regional level. After infrastructure corridors are established, the regional government should have a better awareness and ability to fulfil its roles. Increased responsibility at the regional level for implementing MP3EI would serve as a faster method of implementation rather than at the national level and each Corridor would be able to adapt to its local situation easily. The MP3EI should not be bound to a one size fits all policy, but the regions should have the capacity to implement the policy according to the different needs and abilities of each corridor. Implementation Requirements for the National Corridor The MP3EI needs to contain a number of essential components, the most important being: A stable macroeconomic framework which would deliver low interest rates, low inflation and incentives for higher savings and investment A programme of infrastructural development which would improve the investment climate and produce feasible incentives for private investment in the twenty two main economic activities An industrial policy designed to promote investment in key industries, using a PPP model where appropriate Developing Indonesia s human resources and technological adaptation so as to allow moving towards new frontier technologies as the composition of FDI changes and new products are introduced into the existing supply chains. An architecture of economic growth and social stability augmenting institutions: legal and regulatory, planning and budgeting, financial and banking, monitoring and quality control institutions in important sectors such as education and transport, for example. Page 58 of 87

59 Macroeconomic stability, infrastructure development, rising public and private investment, reform of the institutional architecture and human capital development are all essential components in the economic strategy of the MP3EI. As such, parameters for economic diversification need to be identified simultaneously rather than sequentially. Recommendations for the Implementation of the MP3EI at the National Level Socialisation needs to be improved, since government officials at the national level overall had a much better understanding on the meaning, opportunities and requirements for implementing the MP3EI as compared to the private sector and civil society. A clear set of expectations from different groups of stakeholders needs to be established, as now there is cross over in expectations of different stakeholders- particularly between the private sector and government officials. Increased available information for the private sector as well as inclusive socialisation is the first steps to establish a long term working relationship between the private sector and government to implement the MP3EI. A regulatory review to ensure that the MP3EI can be supported by laws and regulations which are streamlined through the regional and national level. MP3EI Working Units need to be established which coordinate regularly with the national level. These groups should involve a breadth of stakeholders and their targets and quarterly progress should be made available as public information. Improving basic infrastructure should be seen as a national government priority in order to attract private investment in commercial infrastructure. An Action Plan needs to be developed looking at the short and long term needs of developing human resources in each of the six corridors. At the moment, it is not clear in the MP3EI where funding is to be sourced to establish training centres and other resources develop Indonesia s man power. The MP3EI document lays out a breakdown for the infrastructure budget, but there is a lack of a breakdown of a budget for human resource development. An Action Plan needs to be established on the strategies when moving from an infrastructure to an economic corridor learning from the international experience. The national PPP framework needs to be reviewed, projects need to synergised between the national and regional level, with only feasible projects which are ready to commence advertised. The President also needs to take the lead at the national figurehead for the development of PPPs in Indonesia. Page 59 of 87

60 A review of the financing budgeted for the eastern parts of Indonesia needs to be carried out as eliminating regional disparities are a priority for the MP3EI but yet there is a lack of financing in eastern Indonesia which acts as a barrier to growth and also private investment. Different requirements are needed throughout the Six Corridors of the MP3EI and this each corridor must be implemented simultaneously and lessons on implementation must be continuously shared between the Six Corridors. Implementation Recommendations in the Kalimantan Corridor There is a need to better socialise the policy. Most of the regional government were aware of the MP3EI, but there is better knowledge at the national level. It is important to involve the private sector if investment is required from them. Civil society also needs to be involved in order to understand and support the development. Stakeholders who were consulted about the implementation of the Kalimantan Corridor were wearier than their Bali- Nusa Tenggara counterparts about the fundamental economic activities proposed in the MP3EI. Many were concerned that the MP3EI in its current state does not take into account environmental damage caused by the policies and is not in line with the President s target to reduce carbon emissions by 26% by As such, further research needs to be developed on how to align environmental sustainability with economic development in this Corridor. Investment in infrastructure is needed in Kalimantan and the MP3EI hopes to better connect Kalimantan s four provinces. It is important that connectivity unites Kalimantan as one Corridor as at the moment there is a significant lack of a connection and sharing of information between the four provinces. Kalimantan s Indigenous peoples rights must be taken into account especially regarding land rights. The MP3EI establishes that specific human resource skills are needed for the establishment of the Kalimantan Corridor- especially with regards to the fact that the Corridor is centred on promoting both specialist and management training is needed for the oil and gas, coal, palm oil and bauxite sectors including specialists in deep-sea exploration, moving towards clean coal technologies and aluminium design, for example. The MP3EI, however, does not specifically lay out requirements and plans to development human resources for the timber and steel sectors. It is not clear where such training centres will be, who will administer them. Page 60 of 87

61 A regional MP3EI institution must be set up in the Corridor in order for stakeholders to meet, and to act as a hub for accessing information for potential investors and civil society. Implementation Recommendations for the Bali- Nusa Tenggara Corridor There was a positive reaction from stakeholders of the furthering the tourism, animal husbandry and fisheries sectors in the Corridor. However, socialisation in this Corridor is lacking, so the first step would be to build upon this perceived goodwill from stakeholders. As the Bali- Nusa Tenggara Corridor brings together a set of islands rather than one land mass, as in the Kalimantan Corridor, implementing the first stages of connectivity and infrastructure is a large task. In this Corridor, stakeholders throughout this project have debated over whether tourism should be seen as the dominant sector in this Corridor and that one should be careful of viewing tourism as a renewable resource. Mr. Bagus Sudibyo from the Bali Tourism Board at the Lombok Seminar told the story of Bali s tourism industry. As a result of the global recession and of the Bali bombings in 2002 and 2005, tourism in Bali dropped dramatically, showing how relying on one dominant sector can be very harmful. One main barrier mentioned in developing the tourism sector in this Corridor was the tension between groups who have seen the growth of tourism, especially in Bali, as sinful and detrimental to the values and customs of the local community. Promoting tourism further in Bali as well as in Nusa Tenggara Timur means that local communities must be involved in order to avoid a clash. There are disincentives to investing in the fishery and animal husbandry sectors, such as overlapping regulations, lack of fiscal incentives such as tax breaks, and poor infrastructure. These should be a priority in order to attract the private sector. Basic infrastructure needs to be prioritised by the regional government before private sector investment should be expected. There is a need to better engage the private sector from the outset of policy making to ensure the long term relationships which are needed since such large amounts of investment are required from the private sector in order to implement the MP3EI. The private sector needs to be able to access up to date investment data and available investment opportunities. PPP projects also need to be uniform throughout all levels of government. An MP3EI institution needs to be established in the Corridor with easy access for stakeholders to meet and access up to date information on the implementation of the MP3EI. Page 61 of 87

62 Conclusions 1. Build on Goodwill 2. Build on Awareness 3. Virtual Sectretary 3. Involve Stakeholders The vast majority of people consulted as part of this project had belief that the MP3EI can be sucessful. Moreover, stakeholders from all categories wanted to be kept aware of the progress of this policy, indicating that stakeholders were not positive but want to play an active role in the implementation. However, a large number of stakeholders were aware of the many implementation barriers to this policy. The positive reaction from stakeholders was limited by the fact that awareness amongst stakeholders, especially in the regions, is low. Stakeholders agreed that regular bulletins were the best way to keep them informed. Participants at the Kalimantan Semianar also wished for an MP3EI Corrdination Office in each region. These institutions could mean easy access to updates on laws and regulations and investment opportunties for the private sector, as well as provinding information for the local comminuty. Such offices could also house regular meetings with stakeholders so as to achieve the 'Not Business as Usual' collaboration from stakeholders. There is no one central source of information on the implementaiton of the MP3EI, and as such stakeholders can find it confusing to find information. This also acts as a disincentive to invest in the MP3EI. An MP3EI website needs to be created so that people can follow the implementation of the policy. The private sector would also be able to access information on rules and regulations on investing in particular economic activities per corridor. An MP3EI website as a souce of information should be managed by the KP3EI secretariat the the national level. The KP3EI Working Groups at the regional levels should send quartely implementation reports to the MP3EI Secretariat which includes targets met, targets for the next quarter and lessons learnt. Such information should be made public via the MP3EI website so all stakeholders can access information. This is also key in the sharing of data between Corridors. This paper has shown that the current KP3EI model for the implementation of the MP3EI mainly involves government officials and the private sector. It has been voiced by many stakeholders that members of civil society organisaitons must too be included in the decisions in implementation. Feedback from internal meetings of the KP3EI must also be socialised so that larger number of stakeholders are informed and invovled. Essentially, the MP3EI policy is for the benefit of the entire population of Indonesia, and as such members of the public, universities, NGOs etc. should be considered relevant stakeholders. 4. Regulatory Reform All existing regulatory frameworks must be evaluated to attract investors. The national government must carefully monitor regulation and bureaucracy so that all programmes and projects in the MP3EI will run smoothly. The government should also ensure that obstacles to land acquisition must be removed and that tax rules are no longer burdensome to investors. The lack of clarity in terms of explaining when or how national competition needs to be maintained or the limitations of understanding the strategic value of a particular business may cause various interpretations of this stipulation or provision. Since multiple Page 62 of 87 interpretations of this provision may lead to uncertainty and ambiguity, the Indonesian government should clarify these provisions to effectively implement the goals of the Tax Holiday Regulation.

63 6. Institutional Reform Stonger political will is needed behind the MP3EI in order to ensure its success. The President needs to be the voice of the MP3EI both domestically and internationally. Work in battling against corruption needs to be maintained. The connection between Corridors needs to be improved and annual working groups need to take place at the national level with the attendance of all KP3EI Working Groups so that lessons learnt can be shared. Such increased cohesion should increase transpareny and improve the breadth of involved stakeholders. 7. Actively Encourage Private Investment 8. Sequencing 9. Infrastructure BKPM at the national level need to host international workshops on investing in Indonesia. PPPs need to be synergised between the regional and national level, and only projects which are fully feasbile should be proposed. The Indonesian President needs to be the act as the main figurehead for the MP3EI and for all investment required for its implementation. This report has shown that the Kalimantan and Bali- Nusa Tenggara Corridors have different implementation requirements. Each Corridor is inherently unique and thus the use of a pilot corridor may prove ineffective. The implementation of all six economic corridors should occur simultaneously. Preparation for regulatory and institutional reform, developing infrastructure, improving science and technology as well as human resources should all be developed at the same time. Basic infrastructure needs to be developed as a priority at the regional level. To work on reducing regional disparities special attention must be given to islands in eastern Indonesia. Reviewing the budget allocated towards areas with underdevloped infrastrucutre needs to occur as it is unlikely private sector investment will be attracted to regions with lower levels of basic infrastructure. 10. Human Resources Mapping out the manpower planning needs for Indonesia will be a tremendous challenging exercise as it requires detailed research in all sectors of economic expansion, strong time series data, and substantial methodological capacity. In addition, projections of labour and education requirements based from project outputs are subject to various possibilities in production methods and labour market demand. This is going to be a complicated process that cannot be done alone by Ministry of National Education (MONE) as it requires the cooperation of other entities such as Bappenas and the Minstry of Finance to develop more accurate forecasts. Moreover, specific forecasts for the conditions of each one of the provinces of economic corridors are also needed. 11. Envrionmental Sustainability Changes in government structure and planning with regards to its approach to implementing envrionmental sustainable practices into the MP3EI. At the moment, many stakeholders are concerned that the MP3EI is not aligned at all with plans to reduce carbon emissions. Low carbon investments need to occur and PPPs in this regard should be encouraged with incentives from the national government. Page 63 of 87

64 REFERENCES Primary Sources 1. Four reports submitted by The Polling Center. Copies of these can be found in the Annex. 2. Data collected at the four seminars conducted in this project. Secondary Sources Asia-Pacific Economic Cooperation Indonesia s Structural Reform Priorities. Retrieved from Asian Development Bank Midterm Review of the Greater Mekong Sub-region Strategic Framework ( ). Retrieved from Asian Development Bank Mid-term Review of the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT) Roadmap for Development: Retrieved from Asian Development Bank Strategy and Action Plan for the Greater Mekong Sub-region East-West Economic Corridor. Retrieved from Asia-Pacific Economic Cooperation. Indonesia s Structural Reform Priorities. Residential Training Workshop on Structural Reform Singapore August 10-12, Retrieved from Badkar, Mamta. Indonesia Just Got Its Investment-Grade Credit Rating Back. Business Insider, January 19, Retrieved from 19/markets/ _1_indonesia-shocks-policy#ixzz1qo4tK8vS Banomyong, Ruth Benchmarking Economic Corridors Logistics Performance: A GMS Border Crossing Observation. World Customs Journal Volume 4, Number 1. Retrieved from BAPPENAS Sustaining Partnership: Media for Information on Public Private Partnership.National Connectivity 2011 Special Edition. Retrieved from FITAS_ENGLISH_L.pdf Dewi, Andini H Indonesian Law Review: Tax Holiday. Indonesian Legal Page 64 of 87

65 Consultants (SSEK). Retrieved from indonesian-law-review-tax-holiday/ Edward Lee Wee Kok, Eric Sugandi, Fauzi Ichsan, Jennifer Kusuma, Tai Hu Indonesia in the Super-Cycle. Standard Chartered Bank. Retrieved from Heart of Borneo: The Economics of Ecosystems and Biodiversity. December Retrieved from %20Natural%20Capital%20website%20v0%202_Example%20findings_FINAL.pdf KOMPAS. Daily Infrastructure News on AUSAID Indonesia Infrastructure Initiative. KOMPAS, June 9, Retrieved from Lipsey, Robert & Fredrik Sjoholm Foreign Direct Investment and Growth in East Asia: Lessons for Indonesia. Retrieved from Mastel, (Indonesian ICT Society) Toward National Connectivity- Challenge and Opportunity), Dr. Setyanto P. Santosa, Chairman of Mastel, Jakarta 21 September 2011 Presentation. Nuky, Esther. Without Extraordinary Budget, MP3EI Only a Dream: Infrastructure Bonds to be Issued Soon. Investor Daily, November 28,2011. Retrieved from Republic of Indonesia Masterplan Acceleration and Expansion of Indonesia Economic Development Retrieved from Supriadi, Oleh Agust. Government to Launch Global Bonds in February Bisnis Indonesia, December 19, Retrieved from Tampubolon, Hans David Enactment of Land Acquisition Law Delayed Again. The Jakarta Post, March 14, Retrieved from The Jakarta Globe. As MP3EI Blossoms, Resolve Is Needed. The Jakarta Globe. March Page 65 of 87

66 13,2012. Retrieved from The Jakarta Post. China Agrees to Support Indonesia s Economic Master Plan. The Jakarta Post, June 23, Retrieved from The Jakarta Post. I m Not Optimistic with the MP3EI: Economist. The Jakarta Post, July 25, Retrieved from The Jakarta Post. Nusa Tenggara Provinces Need More Investment. The Jakarta Post, October 26, Retrieved from United Nations Environment Programme Sustainable Development Strategy for Greater Mekong Sub-region. Retrieved from Wibosono, B Kunto. PLN Targets Serving 90 pct of Households by Late Antara News, February 7, Retrieved from World Bank Memerangi korupsi di Indonesia yang terdesentralisasi : studi kasus penanganan korupsi pemerintah daera. Retrieved from World Economic Forum The Global Competitiveness Report Retrieved from Yulisman, Linda. Asian Development Bank Calls RI s New Economic Plan Realistic. The Jakarta Post, June 16, Retrieved from Page 66 of 87

67 ANNEXES Annex A. The Polling Center s Interviewees During the Kalimantan Seminar: Government Civil Society Private Sector West Kalimantan Provincial Govt. 1 Walhi, Samarinda 1 Kideco Jaya Agung 1 West Kalimantan BPPMD Samarinda BPPMD 3 WWF, Jakarta 1 Pertamina 1 1 BOSF/RHOI 1 Feedback Infra 1 Samarinda Bappeda 1 Bina Swadaya 1 South Kalimantan Kadin Palangkaraya University Mulawarman University 1 East Kalimantan Apindo 1 East Kalimantan Post Sub total 6 Sub total 6 Sub total 6 Total : 18 respondents Page 67 of 87

68 During the Lombok Seminar: Government Civil Society Private Sector Bappeda Bali 1 WFP 1 Kadin Denpasar 1 Bappeda NTB 1 WWF Jakarta 1 HSBC 1 Bappeda Lombok West Bappeda Mataram City BPMD NTB Bali Office Office Transportation NTB Cultural of Food Security Agency NTB Office of Fishery and Marine Affairs NTB 1 APKLI 1 ASITA 1 1 Economic expert 1 Charoen Pokphand 1 1 Mataram University 1 Bali tourism board 1 1 Gappindo Sub total 9 Sub total 5 Sub total 6 Total : 20 respondents Page 68 of 87

69 During the Climate Change Mitigation Seminar and Ad Hoc Appointments in Jakarta Government Civil Society Private Sector Governor of DKI Jakarta Dept. of the Environment 1 1 Aceh Green 1 PWC 1 WWF Jakarta 1 British Embassy 1 Dept. of Forestry 1 IPB 1 KADIN 1 House Representatives of National Development Planning Agency - Bappenas Capital Investment Coordinating Board - BKPM National Institute of Aeronautics and Space - LAPAN Bakrie University 1 Pertamina 1 Trisakti University GIZ 1 Walhi 1 Habibie center 1 Kompas 1 Infid 1 Univ. buana Mercu 1 Bakrie Corp 1 Sub total 7 Sub total 11 Sub total 5 Note: Verbatim quotes from these stakeholders coming from interviews with The Polling Center can be found throughout this paper separated in text boxes. 1 Total : 23 respondents Page 69 of 87

70 Annex B: List of Pending Laws, Government Regulations, Presidential Regulations, Presidential Decrees, Presidential Instructions and Ministerial Regulations Page 70 of 87

71 Source: MP3EI Page 71 of 87

72 Source: MP3EI Page 72 of 87

73 Annex C: KP3EI Structure at the National Level Division of International Cooperation Working Group for the Kalimantan Corridor Working Group for the Sulawesi Corridor Page 73 of 87