Comment on “Improving Connectivity in Indonesia: The Challenges of Better Infrastructure, Better Regulations, and Better Coordination”

• Published date: 01 July 2016
• Author: Yuri Sato
• DOI: http://doi.org/10.1111/aepr.12140
• Date: 01 July 2016

Comment on “Improving Connectivity in

Indonesia: The Challenges of Better

Infrastructure, Better Regulations, and Better

Coordination”

Yuri SATO†

Instituteof Developing Economies (IDE-JETRO)

JEL codes: F6, H4, H5, O2, R4

Sandee (2016) provides a comprehensive picture of Indonesia’schallengesinimproving

connectivity. On the one hand, Sandee systematically organizes the complicated issue into

three aspects of connectivity, that is, intra-island, inter-island, and international connectivity,

and three kinds of bottlenecks, that is, hard infrastructure, regulations, and policy

implementation. On the other hand, Sandee vividly reveals the reality of the problems; for

instance, complex import clearance often requires importers to consult with the authorities

even after the system came online; and implementation of the government logistic blueprint

lacks coordination among ministries at the national level and between national and local levels.

My comment intends to complement Sandee’s discussion by seeking the logic that the

current administration of Indonesia needs to take into account in formulating its strategy.

First, improvements in connectivity for promoting exports should be one of the top

priorities. The year of 2011 was the turning of the tide. In the decade up to 2011, emerging

countries enjoyed a commodity boom, during which resource-rich Indonesia exports

expanded almost threefold in total value. The top ten export items were dominated by low-

processed natural resources. After 2011, however, exports fell from US$ 203 billion (2011) to

US$ 176 billion (2014) because of falls both in prices and quantity, and the growth rate of gross

domestic product (GDP) slowed down from 6.2% in 2011 to below 5% in 2015. In order to

prop up the post-boom declining trend of the economy, Indonesia needs to diversify its exports

by promoting non-commodity exports (Sato and Damayanti 2015). One of the key elements

determining the competitiveness of manufactured exports is timely delivery. When it comes

to the post-boom reform for boosting manufactured exports, Indonesia has successful

experiences in the mid-1980s after the end of the oil boom. The government at that time, apart

from devaluations of the rupiah and deregulation, made a bold decision to contract out

customs clearance to a Swiss surveyor company to increase the efficiency in logistics. Indonesia

should replicate these successful efforts. In this context, the point of Sandee (2016), which

questions the prioritization of the current government on domestic connectivity over

international connectivity, makes sense. Given the current post-boom challenges, the need

for hard and soft infrastructure to support greater export diversification deserves more stress.

†Correspondence: Yuri Sato, Institute of Developing Economies (IDE-JETRO), 3-2-2 Wakaba,

Mihama-ku, Chiba-shi, Chiba 261-8545, Japan. Email: Yur i_Sato@ide.go.jp

doi: 10.1111/aepr.12140 Asian EconomicPolicy Review (2016) 11, 241–242

©2016 JapanCenter for EconomicResearch 241

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