Tue, 09 Jun 2009

Infrastructure in Indonesia remains a crucial problem hampering growth, the government admitted recently in response to an assessment conducted by the Swiss-based International Institute for Management Development (IMD).

“Infrastructure is still [the government’s] imperative, although overall it has improved,” said Bambang Susantono, the deputy to the coordinating minister for the economy, in charge of infrastructure, on Monday.

Infrastructure development was on the government’s medium and long-term agendas and significant improvements in this sector would materialize next year with the completion of new transportation systems, roads and electricity services, Bambang said.

In its World Competitiveness Yearbook 2009, IMD says Indonesia needs to improve its infrastructure, despite its “most spectacular” performance, rising from 51st place to 42nd, overall.

In terms of infrastructure, Indonesia had dropped from 51st place in 2008 to 53rd in 2009, but in the government efficiency ranking it rose from 38th in 2008 to 31st in 2009; and in business efficiency it rose from 44th to 38th.

By comparison, Singapore ranked 3rd overall, Malaysia 18th, Thailand 26th and the Philippines 43rd.

Emerging economies were also ranked; Brazil was 40th, Russia 49th, India 30th and China 20th.

The US still ranked first, but Hong Kong was swiftly “closing the gap” with the US, gaining second position, the yearbook says.

IMD had surveyed 57 countries worldwide using achievements of each country last year as the basis for its research. These achievements were divided into 329 criteria.

“Indonesia stands out because the economy still has positive growth, which is attractive from an economic perspective because of its strong base,” Coordinating Minister for the Economy Sri Mulyani Indrawati said.

Indonesia’s economy had grown 4.4 percent in the first quarter of 2009 from a year earlier, according to the Central Statistics Agency (BPS). Its Q1 growth was just below that of China and India, while other economies suffered serious downturns because of the global financial crisis.

The government expects the economy to expand between 4 and 4.5 percent this year.

Last week, the International Monetary Fund (IMF) revised its growth forecast for Indonesia from 2.5 percent to between 3 and 4 percent.

“We warmly welcome the survey because it is in line with the government’s aim to improve investment to boost the economy,” Mulyani said.

IMD also conducted a stress test on competitiveness, an analysis of how well equipped countries are to weather the global financial crisis and improve their competitiveness in the near future.

Denmark ranked first in the test because of its resilient business and government sectors.

Other smaller countries in Northern Europe and Southeast Asia, with populations of less than 30 million, will also fare well, IMD says.

Indonesia ranks 33rd in the stress test, which assessed economic forecasts, government policies, business performances and societal conditions.

Singapore ranked second in the stress test, Malaysia 10th, Thailand 19th and the Philippines 32nd. Emerging economies Brazil ranked 22nd, Russia 51st, India 13th and China 18th.

Meanwhile, developed economies the US ranked 28th, the UK 34th and France 44th, as they are hit hardest by the global crisis.

IMD’s World Competitiveness Yearbook 2009 can be accessed at www.imd.ch/wcy09