OBG paints glowing picture of RI's economy

Andi Haswidi, The Jakarta Post - 2007-06-08 09:01

Jakarta, June 8, 2007 - A review of Indonesia's economy ten years after the crisis by London-based research firm, Oxford Business Group (OBG), concludes that Indonesia now has a solid economic base with a bright future ahead as long as certain key requirements are met.

The OBG launched its first-ever report on Indonesia, titled The Report: Emerging Indonesia 2007, during a ceremony here Wednesday that was attended by President Susilo Bambang Yudhoyono. The report was based on nearly a year of research involving 300 interviews with the country's top economic and political leaders, including the President and his economics ministers.

The report says that despite the perils of the country's democratic reforms following the 1997-98 crisis, plus a series of natural disasters, Indonesia's economy has done remarkably well, with GDP growth picking up steadily over the last 10 years. The report argues that the country has now become one of the main investment destinations in the region.

"Our report is principally addressed to the international trade and investment community. To their question, can we do business in Indonesia, our answer is yes," said the editor-in-chief of the report, Andrew Jeffreys.

According to OBG chairman Michael Benson-Colpi, one of the aims of the report is to give Indonesia the higher international profile it deserves, considering its size and potential.

"There is a large number of countries in the world where good developments are taking place, and sometimes there are countries -- and I would certainly say that Indonesia is one of these -- that do not quite get the share of international comment and attention that their size, capabilities and potential would justify," Colpi said.

Despite the recovery from the crisis, the report says that the country still has to address a number of outstanding issues that could hamper future growth.

"We still are still seeing a very high unemployment rate, which reached 10.4 percent in 2006. Not to mention very high levels of hidden unemployment and underemployment of about 30 percent," Jeffreys said.

He also said that the newly introduced Investment Law was not enough on its own. He said the government needed to also show that it could act on its promises to improve the investment climate by pushing through key reforms, which included bureaucratic and labor reform.

Reading the conclusion of the report, Jeffrey suggested that Indonesia should focus on investing in its natural resources and using its comparative advantages in this sector to fuel the economy.

He stressed that the country also needed to liberalize further.

"We are very supportive of the ongoing privatization process. Although much has been sold, there are still plenty of assets that would perform far more efficiently if they were in private hands. The banking sector, for example, still has government involvement in three of the five largest banks."

Commenting on the contents of the report, Investment Coordinating Board (BKPM) chairman Muhammad Lutfi said that he considered it to be objective and that it was in line with studies carried out by investment bankers, such as Merryll Lynch and JP Morgan.

"Their projections even hinted that if India succeeded by emulating China's model, then Indonesia would be the next. We will be on a par with what are often dubbed the BRIC countries -- Brazil, Russia, India and China.

"The other 'I' in that will be us," he predicted.

Lutfi also reported that the country's investment climate was on the rise again after a 31.7 percent decrease in foreign investment last year.

"In the first quarter of this year, domestic investment approvals rose by 380 percent from Rp 16 trillion in the same period last year to Rp 77.5 trillion. Meanwhile, foreign investment approvals surged by 498 percent from US$2.36 billion to $14 billion," he said.