Building Bridges: Navigating Indonesia’s Infrastructure Choices

By Kyle Springer

– Indonesia has large and distinctive I&C needs that are unlike any other Indo-Pacific country. This means the government will need to coordinate integrated infrastructure projects that solve its intra-island, inter-island, and international connectivity gaps

– The number of new initiatives the Indonesian government can draw on for infrastructure support does not present either/or choices. Indonesia should be prepared to work with a range of I&C initiatives and match their corresponding strengths and specialisations with the appropriate projects

– The State-Owned Enterprises (SOE) sector needs broader reforms to prevent loss of funds as infrastructure spending continues to increase. The Indonesian government should offer genuinely competitive tenders for I&C projects and encourage more private sector competition

– Indonesia needs to solve the ‘bankability problem’ through capacity building in the Indonesian workforce for skills that contribute to better project design, implementation, and management

– On the geopolitical front, Indonesia can manage the risk through avoiding pitting I&C initiatives in bidding wars

– Indonesia is in a good position to reduce geopolitical tensions through building linkages between initiatives and encouraging national programs to disburse funds through established Multinational Development Banks (MDBs) that have strong governance processes

– Government decentralisation policy presents a geopolitical risk of its own. Subnational governments are at risk of having poor projects designed for political purposes, and the national government should work closely with their subnational counterparts on their I&C needs and ensure bankable projects are developed.

This report is authored by Kyle Springer, Senior Analyst at the Perth USAsia Centre.