Setting priorities to ensure RI's growth<\/p>\n
Andrew Steer, World Bank, Country Director for Indonesia<\/p>\n
The annual meeting of Indonesia's government and the country's
\nmajor international donors, which took place in Bali last week,
\nsaw a picture of the country that is considerably more complex --
\nand quite different -- from the simple caricature often seen by
\nthe outside world. Indonesia at the start of 2003 has come a long
\nway in a short time. The scale of this achievement gives
\nencouragement that real progress can be made on the large agenda
\nof reforms that remain to be tackled.<\/p>\n
One indicator of the progress was that the financial support
\nrequired from donors was the lowest for many years -- and that
\nrepresents a success for the government (which has closed the
\nbudget deficit and reduced its overall debt burden at the same
\ntime) and for donors (who want to assist the country, but don't
\njust want to add to debt).<\/p>\n
The government and donors have a mutual interest in bringing
\ndebt levels down to a more manageable level, and we are working
\ntogether to achieve that outcome. Development cooperation has had
\npositive results here in the years since the financial crisis of
\n1997-1998. We now need to take a deep breath and push on to the
\nnext, even more difficult set of reforms.<\/p>\n
But it is important to understand what has been achieved,
\nbecause too often, such achievements are taken for granted, or
\ndiscounted because of protests or lost in the shadow of the
\nreforms yet to be tackled. They should not be.<\/p>\n
Consider the progress first: Five years ago, Indonesia's
\ncurrency was plummeting, poverty was rising alarmingly, the
\neconomy was contracting, and amidst this scene of crisis, the
\ncountry was enduring a political upheaval as the Soeharto period
\ncame to an end.<\/p>\n
This week, the Consultative Group on Indonesia met and
\nreviewed a more stable economy with modest budget deficit,
\ngrowing at 3 percent to 4 percent, with poverty rates having come
\ndown from 27 percent in the height of the crisis to about 16
\npercent, public debt having declined from 100 percent of gross
\ndomestic product in 2000 to around 70 percent, and a currency
\nthat has settled and recently been strengthening. And amidst
\nthis relative stability, the country is preparing for another
\nfree election in 2004.<\/p>\n
Five years ago, protests were suppressed, newspapers were not
\nallowed to report freely, and civil society groups were not
\nallowed to operate freely. Today, the Indonesian newspapers are
\nfull of comment, criticism and analysis. Civil society groups,
\nfrom think-tanks to non government organizations make their views
\nknown forcefully and publicly, as indeed they did within the
\nmeeting room of the Consultative Group on Indonesia (CGI). People
\nare able to protest and express their views. What looks unruly on
\ninternational television should also be seen as important
\nprogress in the growth of a free, democratic and dynamic
\nIndonesia.<\/p>\n
Important too was the strong response of the Indonesian
\ngovernment to the Bali bombings of Oct. 12. We held this CGI
\nmeeting in Bali as a deliberate gesture of support to the people
\nof Bali and the victims of the awful attacks. More than one donor
\nurged the government to \"apply the same resolve shown in response
\nto the bombings\" to the formidable challenges lying ahead.<\/p>\n
Fundamental weaknesses still exist, and they must be tackled
\nif investment is to return -- for without investment -- both
\nlocal and foreign -- there can be no sustainable long-term growth
\nand poverty reduction.<\/p>\n
The stability which has allowed the economy to register
\nsmaller deficits and lower borrowing requirements is vital for
\ninternational confidence in Indonesia. Just as the financial
\ncollapse shook confidence in the economy, so the Bali attacks
\nshook confidence in the country as a whole.<\/p>\n
Continued serious attention to stability and security will be
\nessential if the confidence of investors and tourists is to be
\nrestored, and if they and their money are to return here for the
\nbenefit of Indonesia. Beyond the issue of stability and security,
\nhowever, donors called for accelerated efforts to deal with a
\nnumber of pressing issues:<\/p>\n
o Reform legal and judicial institutions, so that Indonesian
\ncompanies, investors and citizens can have their rights protected
\nin a transparent and predictable system. This will involve a
\nserious effort to deal with corruption, especially in basic law
\nenforcement, and in the operation of the courts and the customs
\nservice.<\/p>\n
Widespread corruption in these areas and elsewhere remains a
\nserious impediment to investment, as well as being an
\ninfringement on the rights of ordinary people. Not enough has
\nbeen done in this area, and what little progress we have seen has
\nbeen insufficient to make a real difference;<\/p>\n
o Deal with illegal logging, which has seen precious forest
\nplundered, with local people's right violated, and only the
\nillegal loggers making money. Effective management of logging
\nwill require more control and monitoring of the military and
\npolice, who are reported to provide support to illegal loggers,
\nas well as more coordinated efforts from all law enforcement
\nagencies;<\/p>\n
o Restore investment in health and education, as fundamental
\nbuilding blocks of sustainable growth and poverty reduction;<\/p>\n
o Invest in infrastructure, especially power, to avoid
\nshortages which could limit growth. Important here will be to
\ncreate an environment in which private investors will return to
\ninvest in infrastructure, since the public sector will not be
\nable to bear the entire burden itself.<\/p>\n
There is more, and in each area, there is much that needs to
\nbe done. This is not a wish list of nice ideas. These reforms are
\nvital if Indonesia, having come so far, is not to falter. Three
\nto four percent growth is good, but it is not enough to provide
\njobs for people who want work.<\/p>\n
The international community, represented in the CGI in Bali,
\nbelieves that Indonesia can -- and for its own sake, must -- deal
\nwith these outstanding issues. Indonesia's performance over the
\npast five years shows that success can be achieved, even in
\ndifficult areas.<\/p>\n
The continuing high levels of poverty, the lack of productive
\ninvestment, and the need for steady, stronger growth, show what
\nis needed. We stand ready to support the people of Indonesia in
\nthe next phase of this important work.<\/p>\n
A shorter version of the above article earlier appeared in The
\nInternational Herald Tribune.<\/p>",
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