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MASTERPLANACCELERATION AND EXPANSION OF INDONESIA ECONOMIC DEVELOPMENT 2011-2025

R EPUBLIC

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I ND ON ES IA

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Masterplan for Acceleration and Expansion of Indonesia Economic Development Copyright Coordinating Ministry For Economic Affairs, Republic of Indonesia Published by Editor Design by : Coordinating Ministry For Economic Affairs : Deputy Minister for Coordinating Infrastructure and Regional Development, Coordinating Ministry For Economic Affairs : IndoPacific Edelman

First Published 2011 All Rights Reserved

Coordinating Ministry For Economic Affairs, Republic of Indonesia Masterplan for Acceleration and Expansion of Indonesia Economic Development Jakarta: Coordinating Ministry For Economic Affairs, 2011 212 pages; 28 x 30 cm ISBN 978-979-3754-14-7

MasterplanaCCeleratIOn anD eXpansIOn OF InDOnesIa eCOnOMIC DeVelOpMent 2011-2025

Coordinating Ministry For Economic Affairs Republic of Indonesia

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Masterplan P3EI Abstract

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Table of ContentsPreface from The President of Republic of Indonesia Abstract Historical Breakthrough in the Making of MP3EI 1.TheSelf-Sufficient,Advanced,Just,andProsperousIndonesiaA. Preface B. AccelerationandExpansionofIndonesiaEconomicDevelopment C. IndonesiasPositionWithinTheRegionalandGlobalDynamics D.IndonesiasPotentialandChallenges E. AccelerationofEconomicTransformation-ANewWayofWorking (Not Business as Usual) F. MP3EI-AnIntegralPartofNationalDevelopmentPlanning G.FrameworkDesignofMP3EI

8 10 11 13 14 15 15 17 20 23 24 27 28 31 33 39

2.BasicPrinciples,PrerequisitesforSuccessandMainStrategiesof MP3EIA.BasicPrinciplesandPrerequisitesforSuccessfulImplementationofMP3EI B. ImprovingRegionalEconomicPotentialThroughTheDevelopmentofSix Economic Corridors C. StrengtheningNationalConnectivity D.StrengtheningHumanResourceandNationalScienceandTechnology Capabilities

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3. Indonesia Economic CorridorA. Posture of Indonesia Economic Corridor B. Sumatra Economic Corridor C. JavaEconomicCorridor D.KalimantanEconomicCorridor E. Sulawesi Economic Corridor F. Bali Nusa Tenggara Economic Corridor G.PapuaKepulauanMalukuEconomicCorridor

45 46 51 74 96 120 140 156 177 178 179 183 184 185 192

4.TheImplementationandGovernanceofMP3EIA.ImplementationStage B. ImprovementofRegulationsandPermits C. MonitoringandEvaluation

ACKNOWLEDGEMENTS GLOSSARY APPENDIX

Bismillahirrahmanirrahim Assalamu alaikum Warahmatullahi Wabarakatuh, Peace be upon us all, My beloved fellow countrymen, Three years ago, on 20th May 2008, when our country commemorated one century of our National Awakening, I gave a nation-wide address concerning the future of Indonesia. I mentioned at the time that Indonesia can transform into a developed nation in the 21st Century. With the introduction of the main theme Indonesia Can, we pledged and promised to unite and work hard to increase self reliance, competitiveness, with a distinguished and proud nation as prerequisites to becoming a developed nation in the 21st Century, which is likely to be full of challenges as well as opportunities. We may recall, right after our nation commemorated 100 years of National Awakening, the world experienced a serious economic crisis affecting all nations of the world. The economy of developed countries collapsed, and the world experienced a distressful Second Great Depression. However, with the help of God Almighty and the readiness and hard work of every one of us, Indonesia managed to minimize the impact of that global crisis, and our economy not only prevailed but actually grew. This historical episode shows that Indonesia CAN overcome the crisis and meet the challenge. In a gathering with the Kadin business community in Jakarta on 10 September 2009, I asked our countrys business community to synergize and improve Indonesias economy. In a simple and clear language I expressed that our bigger mission within the next 5 years (20102015) was to exercise debottlenecking, acceleration and expansion of Indonesias national development. If we are able to accomplish these three main activities, then our economy will grow more rapidly, employment opportunities will be created, and poverty will be more swiftly alleviated. Meanwhile, when addressing a general assembly during the anniversary of ITS Surabaya on December 14th, 2010, I asked the whole of Indonesia to together build optimism and confidence that Indonesia can become an Advanced Economy from Emerging Economy 15 years from now. At that time, many world institutions and observers have predicted that Indonesia, now a member of the G-20, will soon migrate froman Emerging Economy to an Advanced Economy. It was during that ITS address in Surabaya that I first stated to the public the agenda for the acceleration and expansion of Indonesia economy, which includes contributions in technology and national innovations, which is today presented as MP3EI. All of what I have extended is solely to build our assurance and confidence as a nation, that Indonesia truly CAN build its own better future. Of course, as I so often remind us all, there is never an easy way to reach such high goals. Our ambition to significantly increase economic development starts with developing good strategies, making supportive policies and clear and proper action plans, implemented with persistence and earnest, along with the effective and dedicated leadership of all state and regional officials. Fellow countrymen, The Republic of Indonesia is a nation blessed with almost all of the prerequisites for transformation into a great economic power. With its abundant natural resources, large, productive and young population, and strategic access to the global mobility network, these assets and access empower Indonesia to establish itself to its rightful place among the leading economies of the world. This perspective is supported by many international agencies therefore we must prove to the world that Indonesia is worthy and capable of being a big player in the global economy.

As we all know, development measures implemented since our independence 66 year ago has brought progress and improvements in many fields. This success is partly reflected by the ever increasing wealth and prosperity of the people, the reduction in poverty, and the open involvement of the community in the nations various development programs. Nevertheless, we must also acknowledge that our economic growth thus far have not yet reached advanced, inclusive and sustainable growth level. As a country operating within a highly competitive global economies, Indonesias current strengths have not yet earned us our rightful position and recognition. On the other hand, difficult challenges also lie ahead. Indonesias position at the new global economic center of gravity, namely the East Asia and South East Asia regions, demands that Indonesia prepare itself better to accelerate its transformation into a developed nation with prosperity that can be enjoyed equally by all. Therefore, smart and focused measures are necessary with defined indicators and clear management. The development of the Masterplan for Acceleration and Expansion of Indonesia Economic Development (Masterplan Percepatan dan Perluasan Pembangunan Ekonomi Indonesia MP3EI) implemented with a spirit of not business as usual. MP3EI is intended to drive the realization of high, balanced, fair and sustainable economic growth. At the same time through this acceleration process, Insha Allah, Indonesia will be able to place itself at the top ten advanced economies in the world by 2025 and worlds top six by the year 2050. This masterplan has two key factors, i.e. acceleration and expansion. With the development of the masterplan, it is hoped that Indonesia is able to accelerate the development of various existing development programs, especially in boosting value adding of the prime economic sectors, increasing infrastructure development and energy supply, as well as the development of human resources and science & technology. The acceleration of development is expected to boost Indonesias future economic growth. Besides acceleration, the government also pushes for the expansion of Indonesias economic development so that the positive effects of Indonesias economic development can be felt not only at each and every region in Indonesia, but also by all components of the community across Indonesia. The MP3EI is not intended to replace the National Mid Term Development Plan nor the national and regional development processes currently ongoing. On the contrary, the MP3EI also functions as a complementary working document for the above mentioned development plans. To achieve tangible benefits and measurable impacts, acceleration and expansion measures were specifically formulated based on consultation with key stakeholders. Eight main programs and 22 main economic activities have been identified. In addition, 6 economic corridors are identified as growth centers and are expected to boost economic development throughout the nation. Investors and businesses can therefore clearly choose their desired sectors and preferred regions according to their business interest and specialization in accordance with the key economic drivers of the six corridors. The improvement of the investment climate is one of the main agendas in the MP3EI. Therefore, in the short term, improvement of the investment climate will be through debottlenecking, regulations, incentives and the acceleration of infrastructure development needed by all stakeholders. Debottlenecking efforts mentioned above will not be successful without the support of all parties, including the central and local governments. In the future, the local governments are