Mixed Picture
    Category: MP3EI Coverage By : Sonya Angraini Read : 1012 Date : Saturday, May 11, 2013 - 15:06:44

    The Master Plan for Acceleration and Expansion of Indonesia's Economic Development (MP3EI) has entered its third year this month and with the presidential election in 2014, the current government has a lot of homework to turn planned projects under MP3EI into reality. Another issue is how to guarantee to investors that the projects will continue after a change in the administration. Forbes Indonesia talked to three experts, asking for their views on the MP3EI implementation so far: A. Prasetyantoko, dean of the faculty of Business Administration and Communication Studies of Atma Jaya Catholic University; Henri Saparini, economist at the Advisory Group on Economic Industry and Trade (Econit); and Latif Adam, economist at the Indonesian Institute of Sciences (LIPI). The general consensus from these experts is that the MP3EI still faces many challenges, which if the government doesn't address soon, will become increasingly difficult to resolve.

    Challenge

    The Sunda Strait Bridge Project

    Everyone agrees that the Sunda Strait bridge is a good idea. It will connect Java and Sumatra, the two islands that are the largest contributors
    to Indonesia's economy, with 58% and 24% respective shares. Right now, getting from one to other requires either a plane or a two-hour boat ride. The bridge will cut the commuting time to 30 minutes. When completed, the bridge would be the largest MP3EI project in Sumatra economic corridor in value terms and would be the longest over-water bridge in Southeast Asia. President Susilo Bambang Yudhoyono has said he wants construction to start before 2014, as one of the legacies of his administration before he leaves office.

    What is controversial is how to pay the construction cost—the estimated cost of the Sunda Strait bridge is at least Rp 150 trillion, though some reports have put it at up to Rp 250 trillion. Former Finance Minister Agus Martowardojo, now set to head the central bank this month, believes that the government should fund the entire amount. President Susilo Bambang Yudhoyono and Coordinating Minister for Economic Affairs Hatta Rajasa say the cost is too large to be financed by the government alone. One scheme proposed by Hatta is to have the bridge built under a public-private partnership scheme with the involvement of private or state-owned enterprises.

    Advantage

    Unilever's New Oleochemical Plant in Sei Mangkei, South Sumatra

    The Master Plan for Accceleration and Expansion of Indonesia's Economic Development (MP3EI) is supposed to spur regional development. If one wants to see a prime example of how the MP3EI will achieve this, consider the case of PT Unilever Indonesia, the Indonesian arm of multinational Unilever Plc. Unilever Indonesia has two factories in Java, and although it has operated for more than three decades in the country, it has never put any factory outside of Java.

    Under MP3EI, Unilever is ready to change that, with plans to start construction on a new oleochemical plant in North Sumatra this month, representing Rp 1.45 trillion investment, one of the largest investments that Unilever Indonesia has ever made into the country. The plant will be located on 18 hectares in Sei Mangkei, a development area that was designated as a special economic zone (SEZ) in February last year. For this SEZ, Unilever will be the anchor tenant in the first and most ambitious SEZ attempted by the government. The area is strategic, close to Kuala Tanjung port, giving companies easy access to ocean transport. The area is also close to major palm oil plantations.

    By building the plant, Unilever will be able to produce its own oleochemicals, the raw material used in many of its products such as soaps, thus lowering its costs and giving it more control over its manufacturing process. The state-owned PT Perkebunan Nusantara (PTPN) III palm oil producer is nearby and has signed a conditional sales agreement to supply Unilever with crude palm oil needed to make the oleochemicals. When fully operational, the Unilever plant is forecast to produce 200,000 tonnes of oleochemicals a year.



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