Infrastructure Development, Develop Industry

Infrastructure Development, Develop Industry

by Eirinne Carenina de Poere

When the state of infrastructure in a country is weak, it means that the country’s economy is operating in an inefficient manner. Very high logistics costs, leading to companies and businesses that lack competitiveness (due to high business costs). not to mention the emergence of social injustice, for example, it is difficult for some residents to visit health facilities, or it is difficult for children to go to school because the journey is too difficult or expensive.

Infrastructure development and macroeconomic development should have a reciprocal relationship, because infrastructure development causes economic expansion through a multiplier effect. Meanwhile economic expansion creates a need to expand existing infrastructure, to absorb the increasing flow of goods and people circulating or circulating throughout the economy. However, if the infrastructure cannot absorb the increased economic activity (and not enough new infrastructure is developed) then there will be problems, similar to clogged arteries in the human body, which cause life threatening conditions because the blood cannot flow.

Indonesia’s high logistics costs can lead to substantial price differences between provinces in the archipelago. For example, rice or cement is much more expensive in eastern Indonesia than in Java or Sumatra because of the additional costs incurred from the point of production to the end user. In other words, the weak trade network in Indonesia, both inter-island and intra-island, causes heavy inflationary pressures on domestically produced products.

Inadequate infrastructure also affects the attractiveness of the investment climate in Indonesia. Foreign investors are concerned about investing in, for example, manufacturing facilities in Indonesia if electricity supply is uncertain or transportation costs are very high. Investment in transportation infrastructure can be in the form of repairing or improving the performance of the existing transportation network as well as the construction of a new infrastructure. The benefits of investing in the transportation sector if viewed from the value of economic benefits can contribute in the form of saving travel time, and reducing transportation costs.

The progress of an area can be seen from the development of its regional infrastructure, which is supported by good infrastructure, it will support the economic activities of the region. Road infrastructure investment will affect the economic sector with the assumption that this increase will act as a stimulus for regional economic development or as a fulfillment of the level of demand (demand) of a region’s economic growth.

One of the benefits of investing in road infrastructure in the economic sector is as a function of mobility, namely the function of distributing goods, so this is expected to encourage regional economic growth. Mobility is fundamental and important for economic activity where transportation performance will affect the production sector. Smooth or not the distribution of goods will greatly affect the production sector. Likewise, high transportation costs will cause an increase in production costs and result in high selling values. This will affect the purchasing power of consumers.

The unavailability of good road infrastructure will result in a lack of volume of production goods that can be transported and can increase transportation costs to transport these products. Transportation must be able to provide benefits to the processing industry sector, namely providing accessibility (Provide Access) and acting as a logistics/distribution function (Taking Raw Material; manufacture to consumer).