Macro stability alone cannot save RI: Morgan Stanley<\/p>\n
Dadan Wijaksana, The Jakarta Post, Singapore<\/p>\n
The economy will fare much better if the government applies
\nnew development strategies that focus not only on sustaining the
\ncountry's macroeconomic stability, said U.S.-based investment
\nbank Morgan Stanley.<\/p>\n
The need for adopting such policies should become clearer as
\nglobal economic growth, including Indonesia's, is hampered by the
\nongoing war in Iraq, Daniel Lian -- the bank's senior Southeast
\nAsia economist -- told a number of reporters here last week.<\/p>\n
\"Indonesia's cyclical growth momentum of 3 percent to 4
\npercent will neither raise living standards nor lower
\nunemployment. Only a higher level of growth will avert a
\npermanent debt trap, alleviate poverty and solve social and
\nunemployment problems,\" Daniel said.<\/p>\n
The current relatively mediocre economic performance was
\nmostly due to the government's current policies centering on
\nfiscal and monetary prudence and stability. Central pillars of
\nthese included a significant reduction in government subsidies,
\nprivatization and divestment programs, and reductions in domestic
\ndebt.<\/p>\n
Despite having been able to achieve a stronger rupiah, a
\ncontrollable inflation rate and a hefty decrease in the central
\nbank's interest rates, this was not enough to generate sufficient
\neconomic growth to reduce poverty and unemployment, Daniel said.<\/p>\n
According to one estimate, currently around 16 percent of the
\ncountry's 210 million population live in poverty.<\/p>\n
Daniel said that for the economy to grow at around 5 percent
\nto 6 percent in the long run, several initiatives were available
\nto the government.<\/p>\n
They were: promoting skill-and resource-driven small and
\nmedium enterprises (SMEs) so as not to rely solely on the mass-
\nproduction manufacturing sector, and developing infrastructure to
\nkick-start and support growth in domestic private investment.<\/p>\n
A complementary relationship with newly-emerging economic
\ngiant China should also be pursued.<\/p>\n
Given its low wage structure, Indonesia could take advantage
\nof the rise in China's wage structure by inviting investors to
\nmanufacture low-end products here whose production in China had
\nbecome less economic.<\/p>\n
Other steps that Indonesia should take to promote higher
\ngrowth were accelerating labor exports and leveraging neighboring
\ncountry Singapore.<\/p>\n
In terms of population, Indonesia should be able to
\nsignificantly increase its labor exports, which today only stood
\nat around one million people, far less than the Philippines,
\nwhich has more than seven million people working overseas.<\/p>\n
As for Singapore, Daniel said Indonesia should start setting
\nits sights on the neighboring country as a potential investor
\namid decreasing foreign direct investment (FDI) from other
\ncountries.<\/p>\n
\"Singapore could become a major investor in Indonesia as it
\nwas to a degree before 1998 (the crisis),\" he said.<\/p>\n
Based on the company's estimate, Singapore has built an
\nexternal economy worth some US$200 billion and could spend a
\nfurther $10 billion to $15 billion a year over the next 12 to 15
\nyears.<\/p>\n
\"Capturing a fat slice of that FDI outflow would go a long way
\nto making up investment shortfalls in Indonesia,\" Daniel said.<\/p>\n
Macroeconomic forecast for Indonesia*<\/p>\n
-----------------------------------------------------
\n(%) 2002 2003 2004
\n-----------------------------------------------------
\nGDP growth 3.7 3.2 3.8
\nInflation 11.9 9.0 8.0
\nExport growth 0.8 6.6 7.6
\nImport growth 0.8 8.0 8.2
\nBudget deficit 2.5 1.8 1.5
\n-----------------------------------------------------
\nSource: Morgan Stanley Research Forecasts<\/p>\n
* The forecasts were made before the Iraq war erupted<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/macro-stability-alone-cannot-save-ri-morgan-stanley-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }