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World Bank warns Indonesia about lack of investment

The World Bank yesterday warned Indonesia of an urgent need to invest in new infrastructure to improve the nation's long-term economic growth prospects.

"Unless some serious new investment and improved management takes place in infrastructure, Indonesia's long-term growth will be threatened," said Andrew Steer, the World Bank's country director for Indonesia.

Indonesia's economy is expected to grow slightly less than 4 percent this year, which is deemed insufficient to absorb the 2.5 million new entrants into the job market. There are already 40 million people classified as unemployed or underemployed.

Public and private investment in Indonesia's infrastructure has dropped off dramatically since the country slipped into a multi-dimensional political-economic-social-security crisis in 1997, leaving the vast archipelago nation with one of the poorest infrastructure networks in Asia, according to the World Bank's latest report on the sector, titled "Averting an Infrastructure Crisis."

The report says only 1.3 percent of Indonesia's 215 million people have access to network sewerage, the lowest percentage in Asia.

Only 53 percent of the population have household access to electricity, compared with 80 percent in the Philippines, 82 percent in Thailand, 98.6 percent in China and 75.8 percent in Vietnam.

Indonesia has 9.1 telephone subscribers per 100 people, compared with 21.9 in the Philippines, 9.6 in Sri Lanka, 22.2 in Thailand and 32.8 in China, according to the World Bank report, which was made public yesterday.

The bank, which hosted a seminar on infrastructure for Indonesian government ministers and private sector participants yesterday, urged the government to devise a clear-cut strategy to direct more investment into infrastructure, without which the country's economic prospects are dim.

Part of the strategy must include reducing the rampant corruption that has plagued most infrastructure projects in the past, said World Bank officials.

"You simply aren't going to get investment in infrastructure if corruption is so deep," warned Steer.

The World Bank, which praised Indonesia for recently adopting new "best practice" procurement regulations on government tenders, noted that "the total amount of money lost through corrupt procurement practices ranges from US$700 million to US$2.1 billion per year."

Indonesia's coordinating minister for economic affairs, Dorodjatun Kuntjoro-Jakti, who was attending the seminar, acknowledged that the government's performance in infrastructure building had been poor in the past five years but blamed it on the country's massive debt accumulated since the 1997 financial crisis.

"We just didn't have the money," said Kuntjoro-Jakti. "Most of the money was spent to meet our debt payments."
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