Economy better, investment needs fixing<\/p>\n
Urip Hudiono, The Jakarta Post, Jakarta<\/p>\n
The World Bank acknowledged that Indonesia's economy has
\ncontinued to improve, but urged the new government to act quickly
\nin fixing the still weak investment climate to push economic
\ngrowth.<\/p>\n
In an update on Tuesday of its East Asia and the Pacific
\neconomic outlook, the World Bank revised its forecast for
\nIndonesia's gross domestic product (GDP) growth in 2004 to 4.9
\npercent from the previous 4.5 percent, and to 5.4 percent from 5
\npercent for 2005.<\/p>\n
The Bank said the economy grew by 4.7 percent during this
\nyear's first semester, while the unemployment rate in May was
\ndown to 7.4 percent from 8.5 percent in August 2003.<\/p>\n
The government had set an economic growth target of 4.8
\npercent for this year. Newly elected President Susilo Bambang
\nYudhoyono, however, is expecting to be able to reach a GDP growth
\nof between 5 percent and 7 percent, and an unemployment rate of 6
\npercent for the country's 212 million people, in the next year.<\/p>\n
Investment in the country rose by 8.3 percent during the first
\nsemester, much higher than the 0.4 percent during last year's
\nsecond semester.<\/p>\n
The World Bank, however, warned that Indonesia's investment
\nclimate remains uncompetitive in comparison with international
\nconditions.<\/p>\n
Exports, though increasing in value, are also actually
\ndeclining in volume and losing the market share as its growth
\nlags behind that of global export growth.<\/p>\n
\"The next few months are crucial to Indonesia's medium-term
\neconomic picture,\" the Bank said. \"A new economic policy package
\nand early implementation steps by the new government would draw
\nfurther attention from investors and markets.\"<\/p>\n
Concerning the investment climate, the World Bank pointed to
\nits recent Doing Business Survey 2005 report, which shows that it
\ntakes 151 days for investors to start a business in Indonesia --
\nfive times longer than in Malaysia or Thailand.<\/p>\n
\"Despite signs of investment recovery, Indonesia's investment
\nclimate remains weak as compared to regional competitors,\" the
\nBank said.<\/p>\n
The government should therefore pass a new investment law to
\nprovide legal certainty for investors, the bank said, and act
\ncarefully with the Social Security Law so as not to raise
\nuncertainty over labor and fiscal costs.<\/p>\n
While praising the recent Bankruptcy Law and President
\nSusilo's commitment to the business community by tackling
\ncorruption and government red tape within 100 days, the Bank also
\nadvised the government to reduce the fuel subsidy and improve the
\ncountry's security conditions particularly in the wake of the
\nterrorist bombing attack in front of the Australian Embassy here.<\/p>\n
\"The bombing had little impact on (financial) markets, but it
\nhas renewed concerns about the security situation and negatively
\naffects the investment climate,\" the Bank said.<\/p>\n
Meanwhile, speaking on how Indonesia could improve its
\nexports, World Bank lead economist for Asia and the Pacific,
\nMilan Brahmbhatt, said that Indonesia could focus on many of the
\nregion's potential markets.<\/p>\n
\"China, for example, has become the region's hub for the
\nassembling industry, and Indonesia's machinery and spare parts
\nindustry should take the opportunity to become its supplier,\" he
\nsaid.<\/p>",
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"sponsor": "Okusi Associates",
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