RI's economic remain inefficient<\/p>\n
MANADO, N. Sulawesi (JP): Bank Indonesia's Governor J.
\nSoedradjad Djiwandono reaffirmed yesterday the urgent need for
\nIndonesia to further improve the efficiency of its economy in
\norder to sustain economic growth in the increasingly globalized
\neconomy.<\/p>\n
\"Our high incremental capital output ratio (ICOR) shows that
\nour economy is still inefficient,\" Soedradjad told the 8th
\nplenary meeting of the Association of Indonesian Economists here.<\/p>\n
He did not specify the rate of ICOR or the amount of capital
\nrequired to generate one unit of output but it was estimated by
\nmany economists at four, the highest in the ASEAN region.<\/p>\n
The issue of efficiency should not be seen as a simple
\nproblem, he said, contending that efficiency is in fact one of
\nthe key factors that will enable the country to sustain
\ndevelopment amid the increasingly competitive global market.<\/p>\n
\"High ICOR requires us to invest a larger amount of capital to
\nbolster economic growth and that condition is not favorable
\nespecially in our country where the investment-savings gap is
\nstill very wide,\" Soedradjad pointed out.<\/p>\n
He said the investment-savings gap has so far been covered by
\nforeign borrowings and foreign direct investment and portfolio
\ninvestment.<\/p>\n
\"The consequence, though, is that our foreign debts have
\nsteadily increased,\" he told approximately 200 economists from
\nvarious provinces.<\/p>\n
He noted that Indonesia has been under closer scrutiny by
\nforeign creditors due to its high indebtedness and the increasing
\nportion of commercial, short-term loans in the debt stocks.<\/p>\n
\"Hence, by increasing our efficiency we will be able to
\nstrengthen our economic competitiveness but at the same reduce
\nour dependence on foreign borrowings,\" he added.<\/p>\n
Latest estimates put Indonesia's foreign debts at the
\nequivalent of about US$100 billion, $60 billion of which were
\ngovernment debts and the remainder owed by the private sector and
\nstate-owned companies.<\/p>\n
The plenary meeting of the economists' association which began
\nat the Manado Beach Hotel yesterday is held under the theme of
\nincreasing competitiveness and efficiency.<\/p>\n
The conference is featuring nine sessions reviewing macro-
\neconomic developments and discussing, from theoretical
\napproaches, the issue of efficiency in various fields such as
\nfinancial and monetary, taxation, manufacturing, accounting and
\nmanpower sectors and competition policy.<\/p>\n
Not promising<\/p>\n
Anwar Nasution, professor of economics at the University of
\nIndonesia in Depok near Jakarta, who discussed macro-economic
\ndevelopments, expressed pessimism about the medium-term prospects
\nof the country's economy.<\/p>\n
\"Indonesia's short-term prospects look good. Nevertheless, for
\nreasons mostly of Indonesia's own making, the medium-term
\neconomic prospects do not seem as promising,\" Anwar observed.<\/p>\n
At the macro level, he added, there is a tendency for internal
\nand external imbalances to increase due to the erosion of
\nfinancial discipline and a rise in debt repayments and servicing.<\/p>\n
At present, though, the imbalances are masked by capital
\ninflows, he said.<\/p>\n
He recalled that until 1994, the group of conservative
\neconomists in the government were able to maintain high fiscal
\ndiscipline and to resist imprudent demand for expensive projects.<\/p>\n
\"But the technocrats have been sidelined from the center stage
\nof policy making and their influence weakened by the recent
\ntransfer of some of their power to non-economists who now
\ndominate the policy-making bodies,\" Anwar pointed out.<\/p>\n
He strengthened his observations by quoting a recent newspaper
\ninterview with Subroto, one of the country's economic architects
\nin the 1970s and early 1980s.<\/p>\n
Subroto, former secretary general of OPEC, expressed his
\nconcerns about the erosion of financial discipline, the inertia
\nof government bureaucracy, monopoly, business conglomeration at
\nthe expense of income distribution and fair market competition.<\/p>\n
Anwar pointed to stronger pressures on the budget as well as
\non state banks and other financial institutions to finance new
\nsub-optimal projects and to rescue ailing companies from
\nbankruptcy.<\/p>\n
He cited the steep increase in off-budget transactions which
\nblur the distinction between public finance and monetary and
\ncredit policies and between public finance and the financial
\ntransactions of politically well-connected companies.<\/p>\n
\"State companies are still treated as arm's length extensions
\nof the public administration and ministries,\" added Anwar, who
\nwill soon take up the post of Sasakawa Distinguished Professor
\nfor the Chair in Development Policy at the United Nations
\nUniversity in Helsinki, Finland.<\/p>\n
He also pointed out the artificial entry barriers to various
\nindustries and numerous distortions that hinder fair market
\ncompetition.<\/p>\n
Unless these weaknesses in economic management are not
\nproperly addressed, they could cause serious problems in the
\nmedium term, Anwar warned. (vin)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ris-economic-remain-inefficient-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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