Funding Strategy to Achieve Golden Indonesia 2045
Indonesia has a big goal to become a developed country by 2045, which is stated in the long-term planning document, the National Long-Term Development Plan (RPJPN) 2025-2045.
This grand vision must be translated into concrete steps through medium-term planning in the National Medium-Term Development Plan (RPJMN) 2025-2029. In order to realise these goals, Indonesia is faced with enormous funding needs.
Therefore, efficient and innovative funding strategies need to be prepared to achieve the set development goals, both from government and non-government funding sources.
To provide an overview of development funding needs in the previous period, the Ministry of National Development Planning/Bappenas has projected investment needs to achieve development goals in the 2020-2024 RPJMN which reached IDR 35,455.6 trillion.
Of the total amount needed, the government can only contribute around 8.4 to 10.1 per cent, while SOEs contribute around 8.5 to 8.8 per cent, and the rest is met by the private sector and the community.
One of the key steps in increasing the government’s contribution to development funding is through optimising fiscal policy, especially in increasing tax revenue and the tax to GDP ratio.
Therefore, in the Technocratic Draft of RPJMN 2025-2029, the Ministry of PPN/Bappenas has developed various interventions to address this issue. Among them are institutional improvement of tax administration, increasing the tax base by encouraging the informal sector to shift to the formal sector, and tax intensification.
For example, in terms of tax intensification, one of the steps that can be taken is to evaluate the Value Added Tax (VAT) policy, capitalise on the high level of household consumption, and pay attention to the role of Non-Profit Institutions Serving Households (LNPRT).
In addition, it is important to review the tax holiday policy that can incentivise certain sectors to generate more tax revenue for the state.
Beyond funding from the government budget, the private sector and society also play a crucial role in supporting the development of Indonesia 2045. Therefore, policy optimisation that focuses on the utilisation of long-term funding instruments, such as pension funds, is crucial.
Pension funds, which manage large amounts of funds, can be a stable and sustainable source of funding for infrastructure development and other important sectors.
In addition, one area that deserves special attention is innovation in climate change-related financing, such as green financing and blue financing.
These two instruments can help Indonesia respond to global challenges related to climate change by providing financing for projects that focus on renewable energy, sustainable management of natural resources, and ecosystem protection.
Furthermore, Indonesia also needs to strengthen blended financing, which combines public, private, philanthropic and CSR funds. Through this collaboration, limited resources can be maximised to fund large projects that have a wide impact.
In addition, funds from the religious sector can also be utilised, given the huge potential that religious institutions have in raising funds for social and development activities.
Source: Bappenas
