Apology for the late delivery, please kindly have your order now -- on infrastructure.
Early next year, we will have the second infrastructure summit. Apparently the first summit earlier this year did not meet the target of significant increase of infrastructure development.
I agree with Easterly (2001) that, due to the so-called stabilization policy,
... (T)he compression of infrastructure spending does not guarantee the sustainability of the public sector. Infrastructure spending cuts not only reduce the public deficit (thereby raising the public sector's net worth) but also leads to a decline in infrastructure stock accumulation and in output growth as well...
Studies on business obstacles in Indonesia also point out that bad infrastructure hampers investment and economic activity.
And everybody in the government seems agree with this, too. Yet, the next question is what kind of infrastructure to be prioritised –due to limited government money. Of course it is the ones that have larger output multiplier effect. LPEM-FEUI (2005) study finds that irrigation has the largest output multiplier (0.126), followed by road (0.088) and electricity (0.086).
Alas, somehow we never heard the plan to build irrigation during the infrastructure summit.