RI economy strong, yet risks loom<\/p>\n
JAKARTA (JP): Significant risks loom over Indonesia's economy,
\ndespite its strong fundamentals, because the current account
\ndeficit may worsen, deregulation has lost momentum and core
\ninflation is still high, the World Bank warns.<\/p>\n
The World Bank said in its latest annual report on Indonesia
\nthat the country's economy performed very well last year with 7.8
\npercent growth, its inflation dropping to 6.6 percent and
\ndomestic and foreign investments remaining buoyant.<\/p>\n
\"Despite this strong performance, significant risks remain,\"
\nwarns the report, Indonesia sustaining high growth with equity,
\nwhich was issued here yesterday.<\/p>\n
The report praises Indonesia's fiscal policy as responsible
\neven in the run-up to the election and its prudent foreign
\nborrowings as well debt management.<\/p>\n
But, the higher oil earnings were not fully sterilized by an
\nincreased fiscal surplus and off-budget spending looks less
\ncontractionary, it warns.<\/p>\n
It noted that the deregulation drive has slowed and even
\nreversed in some areas. There has been slippage in scheduled
\ntariff cuts and domestic regulations continue to hurt efficiency
\nand inter-island equity.<\/p>\n
\"About 800 of the announced tariff cuts were not implemented
\non schedule,\" the report said.<\/p>\n
The World Bank praised the lifting of the ban on imports of
\nused fishing ships but said the measure was immediately followed
\nby costly local content regulations.<\/p>\n
It said a lack of transparency and competition had hurt
\nperformance in sectors such as infrastructure and natural
\nresource development.<\/p>\n
\"Ad hoc interventions (which are on the rise) and other common
\nlocal practices are coming under increasing global scrutiny,\" the
\nreport cautions.<\/p>\n
The World Bank, the coordinator of Indonesia's creditor
\nconsortium -- the Consultative Group on Indonesia (CGI) -- warned
\nthat unless momentum was restored to deregulation, Indonesia
\nrisks slower growth and deteriorating equity.<\/p>\n
The report also addressed the issues of invisible business
\ncosts and good governance.<\/p>\n
\"Only modest improvements have been made in the complex web of
\ndomestic restrictions, fees and levies,\" the report said.<\/p>\n
The World Bank warned there was a widely-held perception that
\nthe invisible costs of doing business in Indonesia were very
\nhigh.<\/p>\n
It quoted a survey by Japan's External Trade Organization in
\n1995 which concluded that 50 percent of Japanese firms operating
\nin the county cited complexity of administrative procedures as
\nthe most difficult problem faced by their businesses.<\/p>\n
\"Without effective institutions and good governance,
\nbusinesses can have their competitive position adversely affected
\nby the selective imposition of regulations, taxes and laws,\" it
\nsaid.<\/p>\n
The World Bank said that credibility of public policy and the
\nconsistency with which rules were enforced and property rights
\nprotected had an important effect on the level and pattern of
\ninvestment.<\/p>\n
It quoted the findings of surveys of businessmen which gave
\nIndonesia high marks for criteria such as little risk of
\nexpropriation with no compensation but low marks for bureaucratic
\ndelays and contract enforceability.<\/p>\n
\"Such factors increase uncertainty and risk. They favor the
\nwell connected over the efficient and they inflate costs. They
\nengender cynicism and the perception of unfairness,\" it said.<\/p>\n
The report said that these perceptions had not impeded growth
\nor foreign investment in recent years. Nonetheless, to keep pace
\nwith other successful countries, Indonesia will need to address
\nthis issue sooner or later.<\/p>\n
Ports<\/p>\n
The World Bank called for serious attention to seaport delays
\nand the problems caused by new regulations and bureaucratic
\nobstructionism in sea transport.<\/p>\n
It also suggested that the customs performance be subject to
\nindependent evaluation to ensure that import flows remain as
\nsmooth as before April when the country used a pre-shipment
\ninspection system to clear imports.<\/p>\n
\"If there is a deterioration (in customs service), it is
\nessential that action is taken quickly to restore quality
\nservice, otherwise opportunities for growth and employment
\nexpansion will be forfeited by increased costs of imported
\ninputs,\" it warned.<\/p>\n
The World Bank reminded CGI that despite the increased role of
\nprivate-sector financing, official foreign assistance would
\ncontinue to be important for Indonesia.<\/p>\n
Therefore, \" a level of commitments from the CGI roughly
\nsimilar to last year (US$5.26 billion) would be very supportive,\"
\nthe World Bank suggested. (vin)<\/p>\n
Editorial -- Page 4<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/ri-economy-strong-yet-risks-loom-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }