Production-based or only market-based for investors?

Indonesia’s government will emphasize building infrastructure projects on its eastern islands in 2013 as it seeks to spread development across the archipelagic nation to boost economic growth.

“The government must balance infrastructure improvement in areas that haven’t been developed with those that have,” Deputy Public Works Minister Achmad Hermanto Dardak said in an interview yesterday. “We will finish roads in Sumatra, Kalimantan and Sulawesi to connect the provinces on those islands, and we will build roads in Papua.”

Indonesia must shift the share of total spending from subsidies into social programs and infrastructure to sustain growth, attract investment and reduce poverty, according to the World Bank. Faster economic growth is stretching the capacity of roads and ports as goods flow through the world’s largest archipelago, which covers 5,300 kilometers (3,300 miles) across more than 17,000 islands along the equator.

Infrastructure spending has fallen to about 4 percent of gross domestic product from more than 8 percent in 1995 and 1996, the World Bank says. The government plans to invest about 3,000 trillion rupiah ($309 billion) by the end of 2014 on infrastructure, manufacturing facilities and projects such as dams as part of its 2011-2025 development plan, Coordinating Minister for the Economy Hatta Rajasa said at yesterday’s seminar.