Jakarta Roundtable: Infrastructure, Investment and Internationalisation
In July, The Legal 500 and GC magazine, in partnership with Dentons Rodyk, hosted a roundtable in Jakarta to consider the contemporary state of infrastructure in Indonesia, as well as the legal frameworks instituted to facilitate development.
Infrastructure in Indonesia
Infrastructure development has long been neglected in Indonesia – a characteristic that President Joko Widodo (Jokowi) set as a primary goal for his administration to rectify during his term. The World Bank says Indonesia has a $1.5tn infrastructure gap when compared to other emerging economies, with a lack of effective transport corridors across the 17,000 islands cited as a major hindrance to economic development.
After taking office in 2014, Jokowi took advantage of a fall in global oil prices to put a cap on an expensive fuel subsidy the government had been providing, freeing up fiscal resources to inject $15bn into the state infrastructure budget. By 2017, that figure had more than doubled, as the government worked towards fulfilling its slate of ‘national strategic projects’ – 222 major initiatives, 20 of which are complete and 127 of which are under construction.
As with any major infrastructure development, let alone one with the ambition and scale of Jokowi’s, Legal is expected to play a major role.
A common issue raised by GCs in attendance was the difficulty in navigating Indonesia’s complex regulatory frameworks. Despite the Jokowi administration’s promises to push through a de-regulation drive in an effort to attract more foreign investment and cut through red tape, regulation was still cited as the biggest barrier to the timely development of infrastructure.
With each sector – roads, energy and so on – all having individual laws and regulatory bodies, along with a lack of cohesion across sectors in terms of procurement processes, difficulty attracting foreign capital has been a direct consequence of the regulatory regimes in place.
One GC from the banking sector noted that regulation, along with a push to make projects outside of Java – Indonesia’s most populous island – the primary destinations for foreign capital, has contributed to a dearth of investment, further inhibiting the growth of rural regions.
Indecisiveness from the government, particularly as it pertains to land acquisition powers, was also a major hindrance. Plans for a China-backed high speed railway between Jakarta and Bandung – a major centre in West Java – have been held up for two years in part because of the complicated (and costly) process of moving large swathes of people in the absence of compulsory acquisition powers. A number of GCs in attendance said that introducing compulsory land acquisition powers would be the single biggest change Jokowi’s government could make to jumpstart real progress.
Despite the clear barriers still in place in Indonesia, collective sentiment on the evening called for optimism – with many looking ahead to the 2019 presidential elections as the next momentous event in the infrastructure development timeline.
To read more about the event or view the photo gallery, visit gcm.ag/jakarta.
If you are interested in attending an event with The Legal 500 in Asia Pacific, please contact Ben Lovell (firstname.lastname@example.org).