Indonesia’s infrastructure is way behind, and Bambang Brodjonegoro’s mission is to fix it.
The country is carrying out a global roadshow to pitch for investment in the roads, airports and power plants it needs to overhaul Southeast Asia’s largest economy. Brodjonegoro, the planning minister and former finance minister, met BlackRock Inc. and pension funds on a global tour that’s taken him to Australia, Ireland and the U.K. as he aims to get $3 billion in pledges this year.
“We understand there are a lot of long-term funds, all over the world, looking for higher yield — especially pension funds and life insurers, as well as sovereign wealth funds,” Brodjonegoro said in an interview in London last week. “What we can offer them is growth opportunities. We are trying to lure these funds to start taking a look at infrastructure in emerging economies like us.”
President Joko Widodo, known as Jokowi, will be taking his 2014 election pledges to the voters in the world’s fourth-most populous nation next year as he seeks to win a second term. While Brodjonegoro says the government has succeeded on some of those goals, such as reducing poverty, inequality and unemployment, it has failed to reach a 7 percent target for economic growth.
At around 5 percent, growth is among the fastest in the Group of 20, but Brodjonegoro said the nation is missing out on a global acceleration. While 7 percent growth is now “out of the question,” and a 2019 rate of closer to 5.5 percent is a more likely target, the minister says investment is key to reach even the lower goal.
“We need to have higher investment growth, probably 8 percent, 9 percent or even close to 10 percent,” he said. “When we look at our neighbors’ growth, like Malaysia, Singapore or Thailand, when global demand is stronger, suddenly their economic growth jumps higher than our economic growth. They have been able to capture the better global demand.”
With the government constrained by a limit on borrowing, it is seeking $36 billion of foreign investment needed to make up the shortfall as the nation looks to improve its transport and communications network. Last year it attained $1 billion of funds. Some progress on projects has been made, with a Jakarta-Surabaya toll road and new Bandung airport both due to be completed later this year, Brodjonegoro said.
The country’s politics, difficulty of land acquisition and getting licenses remain the top risks raised by possible investors, he said. Still, putting Indonesia on the investment map remains key.
“We want to make these financial investors also look at Indonesia as a potential,” Brodjonegoro said. “What surprised me, for example, when I went to Australia for a similar roadshow — some fund manager in Australia had already invested in a toll road in Mexico. They go for a toll road in Mexico when Indonesia is just north of Australia.”