Growth to accelerate despite global slowdow

The Jakarta Post, Jakarta

Although many economists are worried that the global economic slowdown will cast a shadow over the country's economy next year, Coordinating Minister for the Economy Boediono says he is confident the economy will actually accelerate.

"I've always been optimistic about Indonesia's economy. I believe that economic growth will be higher than this year," Boediono told reporters Saturday.

He said that the government's target of achieving economic growth of 6.8 percent next year was still feasible, even though many economists estimate that the global economic slowdown will drag down the pace of growth.

The government's growth target is higher than the 6.4 percent predicted by the World Bank, which says that the global economic slowdown resulting from high oil prices and the United States' subprime mortgage crisis will also affect Indonesia.

The country recorded 6.2 percent growth in the first nine months of 2007. The central bank has predicted 6.4 percent growth for the fourth quarter of this year, which will bring full-year growth to 6.2 percent, slightly below the government's target of 6.3 percent.

However, a number of senior economists, such as Faisal Basri and Mohamad Ikhsan Mojo, have forecast a gloomier outlook for the country's economy.

Faisal, for example, said that the increases in fuel prices would further raise production costs for the industrial sector, which has been held back by high economic costs resulting from inefficiency and red tape.

He said that given these circumstances, it would be impossible for the country to achieve the sort of economic growth targeted by the government.

Boediono said that with higher economic growth, the number of people living in poverty would be reduced.

"We're expecting the number to fall by about 15 percent next year," he said.

The World Bank has said that Indonesia has an opportunity in 2008 to reduce the number of people living on under US$2 per day by 4.6 million, from 105.3 million to 100.7 million, out of a total population of 236.4 million.

Boediono said that if the government could stabilize rice prices, it would be able to reduce the poverty rate by more than 15 percent as poor people spend about 30 percent of their incomes on rice.

Meanwhile, an expert advisor to the minister, Jannes Hutagalung, said the government was currently promoting a number of schemes to improve the investment climate, including the introduction of "one-roof" licensing procedures.

According to the International Finance Corporation (IFC), Indonesia ranks 123rd out of 178 countries in the ease-of-doing-business ratings.

"If we could simplify the process for obtaining business licenses, Indonesia's ranking would climb to around the 70 mark," Jannes said.

The government will need to act fast if it wishes Indonesia to continue to be able to compete with its neighbors, such as Thailand and Malaysia, he added.

In September, the University of Indonesia's Economic and Social Research Institute reported that investors needed up to 86 days before they could commence their businesses in Indonesia.

Economist Didik Rachbini told the discussion that the lack of coordination between government institutions made the business climate uncertain.

"It's hard to find a government institution that engages with a specific sector. There's always a tangle between ministries," he said.

Didik added that the government should focus on improving infrastructure, the financial sector, investment climate and SME sector. (adt)