Good is not good enough
    Category: MP3EI Coverage By : Ferry Irwanto Read : 1190 Date : Sunday, May 12, 2013 - 16:11:53

    Ahmad Zamroni / Forbes Indonesia

    Coordinating Minister for Economic Affairs Hatta Rajasa holds one of the most important and powerful posts in the country, with a mandate to ensure Indonesia remains on track in its current strong growth trajectory. His agenda just got busier, as he is taking on an additional role as acting finance minister, replacing Agus Martowardojo who now heads Bank Indonesia, in addition to his regular duties. During a wide-ranging interview lasting nearly 90 minutes, Hatta, 59, would sometimes flip open his Macbook Air, then click open the exact powerpoint slide that illustrated his points. The main topic of conversation was the MP3EI project but the discussion also touched on many other points.

    Forbes Indonesia: Why is MP3EI important for the country?

    Hatta Rajasa: From its name, MP3EI is to accelerate and expand economic development, and not just to keep it concentrated in Java only. That's why we have made the six economic corridors, in Sumatra, Java, Kalimantan, Sulawesi and a Bali to Nusa Tenggara corridor and Papua to Maluku Islands corridor. There must be equitable development, and we are trying to push investments out of Jakarta. That's why we prepared incentives for investors, and made regulations to attract more investments outside Java. The heavy focus is on infrastructure development
    and the real sector. To accelerate and expand the economy, there must be deregulation, debottlenecking, and a harmonization of the regulations between the central and local governments. For that reason, we have implemented a number of regulations to accelerate MP3EI. There are 22 regulations that we have changed and some new laws that we made. We have provided incentives such as tax holidays to attract more investments.

    FI: Are there any other goals for MP3EI?
    HR: There are three pillars of MP3EI. The first is developing those six economic corridors. The second is building connectivity, in which we have to become connected, both domestically and globally. We have to connect every center of economic development to get closer, so we can drop the logistic cost from currently 14% of the total production costs to 10% by 2014. We have to build seaports, airports, railways, toll roads, and bridges. This 14% logistic cost has made our production inefficient. We cannot compete. My target is by 2014 this logistic cost must be at 10% on average. The third pillar of MP3EI is building human resources, science and technology, because we believe strongly that without technology we cannot compete. So, the point is that we must build a knowledge-based economy. Therefore, MP3EI supports a value added economy; it means we have to increase the role of technology and innovation. So, in no less than 15 years, I would like to see Indonesia develop a tech-based economy. Actually, we already have everything necessary; all we need to do is implement them.

    FI: Could you tell us about the origins of the MP3EI?
    HR: When I was serving as minister of transport [2004 - 2009], Boston Consulting Group made a study of economic corridors. I studied this report and made a summary of it. After I took office as the coordinating minister for economic affairs, I described the study at a cabinet meeting in Bogor in 2010, calling it Indonesia's development in six corridors. Then President Susilo Bambang Yudhoyono renamed it the MP3EI and told me to go ahead. So I gathered all the stakeholders, and I asked them to get involved. The Indonesian Employers Association, the Indonesian Chamber of Commerce, the Indonesian Young Entrepreneurs Association, governors, local governments, and universities, they
    were all involved. No one challenged it.

    FI: How will the MP3EI be financed?
    HR: Of course we realize that the state budget is not enough, so MP3EI does not rely only on the state budget. We are encouraging state-owned enterprises, foreign direct investments, and domestic private sectors to also take part in the project. The total investment of MP3EI during 2011 to 2014 should be Rp 4 quadrillion, consisting of infrastructure and real sector projects. Of that amount, the portion coming from the state budget is less than 10%.