Back to results

Standard Chartered issues special report on Indonesian infrastructure

14/02/2011Research / Asia

Indonesia urgently needs to upgrade its infrastructure to ensure that its economy grows at its potential of around 8 per cent per year, according to a special report published by Standard Chartered Global Research. Infrastructure development will also be crucial in Indonesia's fight against inflation, as it seeks to lower the rate of price rise to levels of its regional peers in South East Asia, according to the report.

Infrastructure development has been slow in the past decade and has relied heavily on government spending. However, the government has been unable to allocate the sufficient funding needed, while participation from private investors is still way below what was expected.

The report explores the current condition of infrastructure in Indonesia, focusing on land transport, sea transport, air transport, and power infrastructure. Land transport infrastructure (comprising of roads, toll-roads, railroads and bridges) is still concentrated in Java, home to 59 per cent of the country's population and which occupies about 7 per cent of Indonesia's land area but contributes about 58 per cent of Indonesia's GDP.

As a result of this unequal distribution of national land transport system, resource-rich islands outside Java are still growing below their potential. Meanwhile, compared to other ASEAN-5 countries, Indonesia's main airports and seaports are outdated and, in some cases, overcrowded, putting Indonesia in a less competitive position in the world of international trade.

Tai Hui, Regional Head of Research, South East Asia, Standard Chartered Bank, commented: "In this report, we model Indonesia's economic scenarios to assess the impact of infrastructure development in the transport and electricity sectors. Under the best of our most plausible scenarios, Indonesia's economy is likely to grow in a range of 7.1-7.6 per cent during the 2011-14 period, if the private-sector participation rate in infrastructure development reaches 50 per cent of what is required and the government increases spending on transport infrastructure by 20 per cent a year.

"To help finance the nation's infrastructure needs, the government is preparing to issue infrastructure bonds in the coming year. One of the first infrastructure bonds slated for issuance in 2011-2012 is the infrastructure sukuk, to be issued by the Ministry of Finance to finance projects in the approved national budget. The introduction of a new instrument will help deepen the Islamic bond market in Indonesia and further diversify the ministry's funding sources for the national budget."

Further detail can be found in the full report, entitled ‘Indonesia - Infrastructure bottlenecks'.
https://research.standardchartered.com/ResearchDocuments/Pages/ResearchArticle.aspx?R=75367

 

For further information please contact:

Tai Hui, Regional Head of Research, South East Asia
+65 6596 8244
tai.hui@sc.com

Fauzi Ichsan, Senior Economist, Indonesia
+62 21 2555 0117
fauzi.ichsan@sc.com

Shaun Gamble, Senior Manager, External Communications
+44 (0)20 7885 5934
shaun.gamble@sc.com

 

Notes to Editors:

Standard Chartered PLC

A leading international bank, listed on the London, Hong Kong and Mumbai stock exchanges. It has operated for over 150 years in some of the world's most dynamic markets and earns more than 90 per cent of its income and profits in Asia, Africa and the Middle East. This geographic focus and commitment to developing deep relationships with clients and customers has driven the Bank's growth in recent years.

With 1,700 offices in 70 markets, Standard Chartered offers exciting and challenging international career opportunities for more than 80,000 staff. It is committed to building a sustainable business over the long term and is trusted worldwide for upholding high standards of corporate governance, social responsibility, environmental protection and employee diversity. The Bank's heritage and values are expressed in its brand promise, ‘Here for good'.

What’s next?

Global research

Providing a global perspective to local customers.

Register here

Economists

Need an expert view? Details of our economists, areas of expertise and contact details.

Read more

Share