Indonesia has set a big ambition to become a developed country by 2045. This goal has been written in the long-term planning document, namely RPJPN 2025-2045. To implement this vision, this document will then be included in the 2025-2029 RPJMN.
The Ministry of National Development Planning/Bappenas projects that Indonesia will need large investment costs to achieve this vision. As an illustration, to achieve the development targets in the 2020 – 2024 RPJMN, the amount of investment needed reaches IDR 35,455.6 trillion.
Of the total needs, the government contributed 8.4 – 10.1% and BUMN contributed 8.5 – 8.8%, while the rest was met by the public/private sector. Therefore, it is necessary to increase capacity and expand funding sources from both government and non-government.
From government funding sources, it is necessary to optimize fiscal policy to increase tax revenues and the tax to GDP ratio.
In the 2025-2029 RPJMN Technocratic Draft, the Ministry of National Development Planning/Bappenas has prepared several interventions to overcome this issue, including improving tax administration institutions, increasing the tax base by encouraging the informal sector to become formal, and intensifying taxation.
As an illustration, tax intensification can be carried out by evaluating Value Added Tax (VAT) policies by taking advantage of the high level of household consumption and Non-Profit Institutions that serve Households (LNPRT). Apart from that, it is necessary to review the tax holiday policy.
From non-government funding sources, policy optimization is needed through the use of long-term funding instruments (pension funds), financing innovation to respond to climate change (green and blue financing).
Apart from that, policy optimization is also needed to strengthen the funding mix (blended financing) by utilizing philanthropic funds, CSR funds and religious funds.
Increasing capacity and expanding funding sources are also needed to mitigate the change in Indonesia’s status to a middle-income/developed country. This change in status will make it difficult for Indonesia to obtain financing from the Official Development Assistant (ODA).