A more robust year ahead<\/p>\n
An extremely long dry season, several natural disasters and
\nthe explosion of the US$450 million loan scandal at the state-
\nowned Bank Bapindo notwithstanding, the Indonesian economy last
\nyear proved to be performing better than most projections.<\/p>\n
As mentioned by President Soeharto on New Year's Eve, the
\neconomy grew by more than 6.2 percent, a figure deemed necessary
\nfor the first year of the Sixth Five-Year-Development Plan in
\norder to sustain the ongoing economic development and accommodate
\nthe yearly 2.5 million new entrants into the job market as well.<\/p>\n
The inflation rate was rather high, but was eventually held
\nto below 10 percent. Non-oil exports were declining in the first
\nfew months, but recovered later on. Foreign exchange reserves
\ngrew to an amount adequate to sustaining five-months's worth of
\nimports.<\/p>\n
Looking ahead, the economy seems to be in for even more
\nrobust expansion, at least in the eyes of most economists setting
\nout their views in this paper last week. Their estimates for the
\n1995 growth rate vary between a conservative 6.7 percent up to a
\nbullish 8.0 percent.<\/p>\n
There are several reasons to be optimistic.<\/p>\n
There has been an economic turnaround in the United States,
\nand the economies of Europe seem to be moving in the right
\ndirection. World economic recovery is gradually taking hold in
\nall industrialized countries, lifting that group out of its worst
\nrecession in the last two decades.<\/p>\n
With the United States holding to a relatively solid growth
\npath of around 3.9 percent last year, followed closely by Canada
\nand the United Kingdom, and the Japanese economy seeming to have
\npassed the lowest point in its downturn, the Organization for
\nEconomic Cooperation and Development had strong reasons when it
\npredicted last week that the economies of its 25 member countries
\nwould likely grow by an average of 3.0 percent this year, up
\nslightly from an estimated 2.8 percent last year.<\/p>\n
Despite some protectionist tendencies in the industrialized
\nworld, the fact that the Uruguay Round of the General Agreement
\non Tariffs and Trade was eventually ratified by most members last
\nyear, paving the way for the creation of the World Trade
\nOrganization which begins life this month, surely provides much
\nstronger ground for a growing world market.<\/p>\n
What makes the external economic conjunctures more
\nencouraging for Indonesia is the fact that the world economy's
\ncenter of gravity has shifted to Asia. There is an estimate that
\nwithin the remaining years of this millennium, 40 percent of all
\nthe new purchasing power created in the world will be in East
\nAsia. Even a small chunk of this potential, laid practically in
\nfront of our door, would be more than enough to sustain a
\nrespectable 7.0 percent growth rate for Indonesia this year.<\/p>\n
Domestically, potential for a robust growth can be presumed
\nfirst of all from the fact that the new tax laws, which go into
\neffect with a lower rate this month, will mean a boost in
\ndisposable incomes. A resulting strong growth in fixed
\ninvestments and consumerism should provide this country with a
\nlarger productive capacity to make for a lower cost per unit,
\nbenefiting domestic consumers, as well as making it more
\ncompetitive in the world market.<\/p>\n
Some economists expect the agricultural sector, which
\ncontributes around 18 percent to Indonesia's GDP, to recover
\nstrongly this year from a mere 1.5 percent growth last year. This
\nshould be supported by some expected significant improvements in
\nthe banking industry, after last year's loan scandals, and strong
\ngrowth in several other sectors like manufacturing, mining,
\nelectricity and telecommunications.<\/p>\n
In short, an overall higher growth rate for the country's
\neconomy this year is strongly probable.<\/p>\n
Some words of caution are warranted though.<\/p>\n
First, all of the potential cited above relies heavily on
\nthe role of the private sector. This is as should be expected
\nbecause of the results of the ongoing restructuring of the
\nIndonesian economy over the last decade: to make the economy less
\ndependent on oil, to pursue an economic development with less
\nreliance on foreign aid, and to build a competitive economy in
\nthis fast changing world.<\/p>\n
And what this boils down to is a few but-seemingly-harder-
\nto-get conditions: further deregulation measures and more
\nsubstantial efforts to reduce the high-cost structure of the
\neconomy. Setting up new tariff and\/or non-tariff barriers to
\nprotect certain industries certainly is not in line with those
\nconditions. Neither is the maintaining of still so many
\nmonopolies and oligopolies, which are contradictory to our own
\ncommitment to free trade as signaled from Bogor last November.<\/p>\n
Second, special attention is needed to protect the poor and
\nunderprivileged members of this country. Without any special
\ntreatment, they will be more helpless and disadvantaged in the
\nincreasingly competitive future.<\/p>\n
Both aspects have been hinted at through last week's cabinet
\nmeeting. President Soeharto signaled an austere 1995-1996 state
\nbudget, which means among other things a greater contribution
\nfrom the private sector to sustain Indonesia's economic
\ndevelopment. At the same time he promised to increase spending
\nfor the underprivileged through programs like the Inpres Desa
\nTertinggal.<\/p>\n
We have strong reasons to be optimistic, but on the other
\nhand we need to follow up consistently in order to make it
\nhappen. With this commitment, we wish all of you a very happy New
\nYear.<\/p>",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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