`Govt must push local consumption amid global uncertainty'<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
With the world's gloomy economic outlook expected to further
\nhinder the country's performance in exports and attracting
\ninvestment, the government has no choice but to focus on policies
\nthat can boost domestic consumption, experts say.<\/p>\n
Economist Chatib Basri and businessman Djimanto shared the
\nsame view that domestic consumption, which is now showing signs
\nof weakening, could play an increased role in pushing economic
\ngrowth, as had happened in the past couple of years.<\/p>\n
\"The government has to turn to domestic market-minded policies
\nunder the unfavorable external conditions as in the near future
\nwe have to rely on robust consumption to drive the economy,\"
\nChatib, of the respected Institute for Economics and Social
\nResearch, Faculty of Economy, University of Indonesia, told The
\nJakarta Post on Sunday.<\/p>\n
War in Iraq and the outbreak of Severe Acute Respiratory
\nSyndrome (SARS) has dimmed prospects for international economic
\nrecovery.<\/p>\n
It is feared that a fragile global economy will further hurt
\nthe economies of export-oriented countries like Indonesia, and
\ncreate jitters among investors.<\/p>\n
Against this backdrop, boosting domestic consumption should be
\non top of the government's list of priorities. There are at least
\ntwo things that can be done by the government to achieve that,
\nChatib said.<\/p>\n
On the demand side the government needed to maintain the
\npeople's purchasing power and on the supply side it needed to
\ncreate policies that ensured the prices of goods and services on
\nthe domestic market were cheaper.<\/p>\n
\"Maintaining the stability of macroeconomic indicators, such
\nas inflation, will ensure people keep spending, as high inflation
\nwould otherwise lessen the public's buying ability,\" Chatib said.<\/p>\n
Inflation has been so far kept controllable. Date recorded in
\nthe first two months of the year is in line with the government's
\nfull-year inflation target of 9 percent, thanks to a relatively
\nstable rupiah against the U.S. dollar.<\/p>\n
On the supply front, priority should be given to policies that
\nreduce the costs of products and services, which could eventually
\nspur spending.<\/p>\n
Among other things, Chatib said, the government should modify
\nexisting tax laws on luxury goods, seen as detrimental to
\ncreating competitive prices.<\/p>\n
Djimanto, the chairman of Indonesian Employers Association
\n(Apindo), agreed, saying there were policies that could be taken
\nto reduce production costs, thus reducing the prices of goods,
\nwhich could in turn boost private consumption.<\/p>\n
Apart from modifying tax laws, production costs could be
\nsignificantly reduced by getting rid of various levies and
\nlowering utility prices, including electricity and fuel.<\/p>\n
However, while admitting robust domestic consumption was
\ncrucial in propping up economic activities, Djimanto was of the
\nopinion that such incentives, or stimulus, should be given more
\nto local firms that can better compete, in terms of prices, with
\nimported ones.<\/p>\n
\"We surely do not want to see robust domestic consumption
\ndriven mainly by the sale of imported products,\" Djimanto told
\nthe Post on Sunday.<\/p>\n
The government, which is struggling to balance its books, has
\nbeen pushing hard to generate as much revenue from tax as
\npossible.<\/p>\n
In his response, Chatib said: \"It's a matter of priority, we
\nknow how tight the government's budget is, meaning that it needs
\nplenty of income, but this has to be done to spur the much-needed
\neconomic activities.\"<\/p>\n
The government has targeted economic growth of four percent
\nfor this year, but due to SARS and a lingering recession in
\ndeveloped economies, some say the target is unattainable.<\/p>",
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