Investment and Partnership for Infrastructure Optimization

The last decade marked the Indonesian Government's serious efforts in building infrastructure, demonstrated by an increase in the infrastructure budget allocation from IDR 154.7 trillion in 2014 to IDR 422.7 trillion in 2024. However, continued investment Infrastructure is still needed to achieve economic growth of 6-7 percent in order to achieve the Advanced Indonesia vision.

Also read: Infrastructure as the Foundation and Investment of Civilization

Commercial value of infrastructure development often can only be achieved in the long run. Therefore, direct investment from the government through the state budget (APBN) remains necessary. Nevertheless, with the limited fiscal capacity of the government and state-owned enterprises, active participation from non-governmental entities is crucial. This participation is not only in making investments, but also in optimizing existing infrastructure, to ensure that the investment provides maximum economic and social benefits for the wider community.

Since its founding, the Indonesia Investment Authority (INA), asIndonesia's sovereign wealth fund, has placed investment in the infrastructure sector as its main priority, covering various sectors, such as transportation, logistics, telecommunications and energy. To date, INA and its investment partners have invested more than 3.2 billion US dollars or approximately IDR 50 trillion. INA's interaction with various partners from various parts of the world opens up several new perspectives in optimizing infrastructure in Indonesia.

Infrastructure optimization

Based on our experience, there are three contexts for optimizing infrastructure, namely basic infrastructure in mature areas, basic infrastructure in new areas, and innovative infrastructure to meet needs and/or develop new services.

The first context is the optimization of basic infrastructure, such as roads, ports, and airports in mature areas. The challenge in this context is to optimize the infrastructure to create added value. This optimization can take various forms: it can be in the form of operational and maintenance efficiency, as well as increasing productivity, capacity, and/or service capabilities.

Apart from that, optimization can also be done by applying the latest technology that has been adopted by world infrastructure operators. For example, in container management, implementing automation, data analytics, digitizing supply chains with real-time connectivity with user shipping companies can increase efficiency and speed up the process of loading and unloading container ships at the dock by 50-70 percent.

In the digital infrastructure sector, Indonesia's data center needs are expected to increase sharply, from around 110 MW to more than 300 MW in the next five years.

The second context is the investment in basic infrastructure in new development areas. In these areas, the socio-economic impact on the community can be high. Based on research conducted by the Institute of Economic and Social Research of the University of Indonesia (LPEM UI), it is estimated that the construction and operation of the entire Trans-Sumatra toll road can create more than 1 million job opportunities annually.

Nevertheless, there are significant commercial or financial challenges to overcome, given that usage is sometimes far below the invested capacity. To increase the use of infrastructure, additional investments are sometimes required in the related sectors or areas.

For example, in order to increase the utilization of a new toll road, investments in building industrial complexes or developing residential, retail, or commercial areas along the route can be helpful. In addition, further investment in expanding "connectivity" is needed, such as a wider network of toll roads or a port connected to the toll road.

Lastly, the development of "innovative" infrastructure to meet the unsatisfied needs of the society or consumers is necessary. The private or non-governmental sector often plays a role in this innovative infrastructure context. Innovation is required as demands of certain user segments increase.

For example, in the logistics sector, modern warehouse infrastructure is designed to be able to support the needs of high-demand logistics service users. Such as e-commerce players who need turnaround time or very fast processing times or Third-party Logistics (3PLs). Also automotive players require building specifications such as the ability to withstand runway loads and high fire safety standards.

In the digital infrastructure sector, Indonesia's data center needs are expected to increase sharply, from around 110 MW to more than 300 MW in the next five years, mainly driven by demand for hyperscalers, players. large-scale technology that requires high data center capacity. In addition to ensuring core infrastructure services, new data center installations also need to strive to expand the use of renewable energy considering global consumer demands that require the adoption of sustainability practices throughout their operations.

Also read: Infrastructure Development Vision

Investment and innovation in infrastructure are also needed in social sectors such as education and health. For example, in Australia, social infrastructure investment is made through early childhood education centers, which not only improve access to quality education but also contribute to the country's productivity growth.

For Indonesia, the social sector still requires significant investment. In the health sector, for example, the ratio of hospital beds and number of doctors per 1,000 population is still 40 percent lower compared to other Southeast Asian countries. Many investments are still needed to meet the needs of the community in this sector.

Infrastructure is one of the important foundations for sustainable economic growth. The government and state-owned enterprises play an important role in infrastructure development. However, the participation of the non-governmental sector is important to complement these efforts, both to increase productivity of existing assets, to generate demand for the utilization of new infrastructure, and to jointly innovate to meet the needs of a constantly evolving society or consumer.

Together, we can build infrastructure that not only meets current needs but also prepares Indonesia for a better future.

Arief Budiman, Deputy Chief Executive Officer of Indonesia Investment Authority (INA)