Indonesia in 2014 : Java, ‘Jalan’ and Jokowi Lili Yan Ing  ;   An economist at the Economic Research Institute for ASEAN and East Asia (ERIA), Lecturer at the University of Indonesia

JAKARTA POST,  17 Juli 2014

                                                

The Indonesian economy in 2014? No more wait and see. Three “Js” should be considered as top priorities in the next quarters. The first J stands for Java. Java has been named a “manufacturing corridor”, but very little action has followed. We can count by hand the number of industrial areas on the island, though it is the country’s supposed manufacturing hub. The manufacturing sector provides the highest value jobs for graduates of secondary school, which will contribute to the largest portion of Indonesia’s labor force in the coming decade. Moreover, the development of the manufacturing sector will have multiplier effects on the development of agriculture and services. In 2012, Indonesia provided 27,321 hectares for industrial areas or estates, while Thailand had 18,162 ha and Vietnam had 17,815 ha. In terms of size of country, industrial areas in Indonesia were only 0.012 percent of total land, versus 0.036 percent and 0.058 percent in Thailand and Vietnam, respectively. So the industrial land area of Thailand and Vietnam is three times and 4.8 times respectively larger than that of Indonesia. Java, the main hub for the manufacturing sector, accounted for 82 percent of industrial areas in Indonesia, ranging from Banten to East Java, while the rest are located in Riau Islands, particularly Batam and Dumai, with a smattering in other areas such as Medan, Makassar, Bitung, Bontang and Palu. The same old story of adequate infrastructure (electricity, water, connectivity) was repeated by foreign businesspeople, as shown in a survey by Japan’s Jetro. The survey highlighted low utilization of industrial areas outside Java. On top of that, a weak legal system has also been a major concern in doing business in Indonesia. To move forward in the short run, the government should focus on improvement of industrial areas in Java with consideration paid to labor availability, proper infrastructure and dry ports, with special focus on clusters of industries (e.g. electronics, automotive, garments, chemicals, and so on.) The second J stands for Jalan (road). Indonesia should increase the quantity and quality of its roads. The 416-kilometer Gyeonbu Expressway from Busan to Seoul in South Korea has largely been regarded as a successful output of Korean industrialization policies. The highway has been commended as one of the key instruments in bolstering exports from Korea — delivering products from the country’s provinces to the main export gateway of Busan. Exports of goods and services contributed about 56 percent of Korean gross domestic product (GDP) in 2013. In Indonesia, there are no such highways that connect the main industrial estates to the main export gateways or distribution centers. Jakarta’s outer ring road has been completed, but covers only 65 km. The Tangerang-Merak (the main port) highway is 73 km, and Jakarta-Cikampek is another 73 km. The longest highway, scheduled to be completed by 2015, will be the Solo-Kertosono or Trans Java toll road with a length of 179 km. The main issue is actually not about the length. The more important thing is how industrial and business areas are connected, and how these areas connect to the main export and import gateways (ports and airports). Indonesia, being a vast archipelago, should also develop a more efficient multi-mode transportation system and improve inter-island shipping services. The third J stands for Jokowi (Joko Widodo, the presumptive president-elect). One thing we can learn from him is he has shown a simple and applicable yet very effective way of bureaucratic reform in Indonesia. What does Indonesia need in bureaucratic reform? First, place the right people in the right places based on their professionalism. During his tenure as the mayor of Solo and governor of Jakarta, Jokowi has selected and placed government officials fully on the basis of their professionalism and competence. One simple example is that he regularly conducts an open selection process to elect a head of district. Another example is when he selected a physician who had led communal health services for several years as the head of district where children health was the main issue. Second, he set performance indicators for outputs and services as well as persons in charge to provide services. Third and the most importantly is evaluation. Jokowi has made performance appraisal simple by reviewing and looking at the outputs of the officials being appraised. He often makes surprise visits to see for himself how public services are delivered — how schools, hospitals and public transportation facilities are run. And he acts firmly and quickly on the findings of his field visits. While long term investors still put high hope for long-run Indonesian development, Indonesia should take bold actions in the coming months in expanding and improving the quality of industrial estates, including improving transportation and logistics in those areas and from those areas to the main export/import gateways and continuing bureaucratic reforms particularly in trade and investment procedures. Business players and investors can no longer just wait and see. ●