Hans David Tampubolon, Jakarta – Infrastructure development in Indonesia remains inefficient despite a significant increase in government spending on development projects over the last six years, an economist says.

Indonesian Institute of Sciences (LIPI) economist Latif Adam on Thursday said that from 2005 to 2011, there was a 25.5 percent increase in government spending on infrastructure projects per year.

"However, the ratio of infrastructure spending to gross domestic product is still far below the ideal level of five percent," Latif said.

In 2005, the government spent Rp 32.9 trillion (US$3.63 billion) on infrastructure development. This represented only 1.2 percent of total gross domestic product that year.

Six years later, the government spent Rp 141 trillion on infrastructure while gross domestic product stood at Rp 6,840.4 trillion. That meant the ratio of infrastructure development to gross domestic product was only 2.1 percent in 2011.

Latif also said that government spending did not significantly contribute to economic growth. "Our infrastructure coefficient elasticity to growth stands only at 0.17, far lower than that of China with 0.33 and India with 0.21," he said.

Latif said that inefficient infrastructure development was mainly caused by three factors.

"First, infrastructure budget realization process is very slow. As of September 2011, the utilized budget stood at only around 30 percent. Second, the budget proportion for physical development was very low. Most of the budget was utilized in paying consultants, planning, monitoring and project fees. Lastly, the government showed too much tolerance towards violations of regulations supposedly aimed to maintain infrastructure quality," he said. (nvn)