Weak infrastructure holds back Indonesia economy

Talks on a new location have yet to reach an agreement accepted by all the relatives of the some 500 people buried there. That has not stopped authorities digging a new cemetery a short distance from the old one — pointlessly according to Yaman, the neighborhood chief.

“There is no way we can agree to that,” said Yaman, pointing to workers hacking through the thick red earth amid a midafternoon rain shower. “It will be too noisy. How are we supposed to pray for our ancestors there?”

Indonesia's economy is booming. But to sustain and deepen its growth, it badly needs new roads, bridges, power stations and ports. Land disputes such as this one in west Jakarta, and a host of other difficulties from corruption to budget-draining populism, make building such infrastructure a long and costly process. That is preventing the country from attaining the kind of transformational development experienced in a generation by countries such as South Korea and more recently China.

Last week, floods engulfed around 30 percent of Jakarta, including its central business district, dramatically exposing decades of underinvestment in the drainage and flood defenses of the city of 14 million people.

To be sure, beleaguered economies in the West would envy Indonesia's current growth rate of more than 6 percent. Coupled with political and social stability, it represents a dramatic change from the Indonesia of 12 years ago, when political crisis, separatist violence and economic meltdown led to fears the massive island nation could break apart.

Investment has soared over the last two years amid high Chinese demand for the country's coal, palm oil and rubber and rampant consumer spending across the country. Property prices have doubled in downtown Jakarta over the last 6 years, while malls, hotels, housing estates and convenience stores have sprung up in towns large and small to cater for a newly minted middle class.

The boom has left some wondering whether the country should now sit alongside Brazil, Russia, India and China in the BRIC club of newly powerful emerging economies. While the government expects the country will continue to attract investment, others doubt it will fulfill its potential.

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