Indonesia, known as a large country with the land area of 1,904,569 square kilometers, is the 14th largest country in the world. The ranks increased to the 7th largest country in terms of land and sea area combined, this country consists of 34 provinces. Indonesia's population - which at 261 million makes it the world's fourth-most-populous country, and the most populous in Southeast Asia. According to World Bank, Indonesia's GDP per capita has steadily risen, from $857 in the year 2000 to $13,120 in 2017. Indonesia is the member of the G-20 which is representative of development country that gives economic impact towards the world.
Due to its sheer size and population, The Government of Indonesia estimates that the country will need USD 359.2 billion investment for infrastructure development. However, it is estimated that only 73.5% of the investment value will be delivered through State budget and State-owned Enterprises project (KPSRB Bappenas, 2017).
When the state of infrastructure is weak it implies that the economy runs in a highly inefficient manner such as logistics costs are high, businesses are lack competitiveness (because the costs of doing business are high), and there exists a high degree of social injustice when, for example, it is difficult for part of the population to reach healthcare facilities, or, for children to reach a school.
In fact, infrastructure development and macroeconomic development go hand-in-hand (have a reciprocal relationship) because infrastructure development gives rise to economic expansion through the multiplier effect, while economic expansion gives rise to the need to enlarge existing infrastructure to absorb the larger flow of goods and people that travel across the economy. However, when existing infrastructure cannot absorb rising economic activity (and new infrastructure is not enough developed) then problems will occur, similar to blocked arteries in the human body cause life-threatening conditions.
Lack of adequate infrastructure also seriously undermines the attractiveness of Indonesia's investment climate. Potential (foreign) investors are hesitant to invest in manufacturing facilities in Indonesia when the supply of electricity is uncertain or transportation costs are high. Despite the abundance of energy resources, Indonesia is often plagued by blackouts - particularly outside the bigger cities on Java and Bali - because of shortages in the country's electricity supply. Meanwhile, according to data published by the Indonesian Chamber of Commerce and Industry (Kadin Indonesia) around 17 percent of a company's total expenditures in Indonesia are absorbed by logistics costs, while in peer economies this figure is below ten percent.
The government of Indonesia is fully aware of the importance to offer a more attractive investment and business climate by improving the nation's infrastructure. To resolve the need for Infrastructure investment in Indonesia, The Government of Indonesia is offering Public-Private Partnership scheme in developing infrastructure projects.
At the moment the investment climate for PPP projects is quite good, as Indonesia is having an increase of 19 points in Ease of Doing Business (EoDB) Ranks by World Bank. Indonesian EoDB rank arises from 91 in 2017 to 72 in 2018. At the moment, Indonesia is the Top 3 Asian Best Investment Destination according to the Economist and also the Top 3 of Japan Investment destination (JBIC rating).