2002 growth target within reach: Economists
2002 growth target within reach: Economists
JAKARTA (JP): Noted economists expressed optimism that given the current relatively stable political condition, the 2002 economic growth target of "less than five percent", as recently indicated by Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti, would be attainable.
Economists contacted by the Jakarta Post on Saturday, including Pande Raja Silalahi of the Centre for Strategic and International Studies (CSIS), Raden Pardede of Danareksa Institute, Anton Gunawan of Citibank, and Bustanul Arifin of the Institute for Development of Economics and Finance (INDEF) said that Indonesia would easily register an economic growth of between 4.5 percent and 4.75 percent next year.
But they also warned that remaining security problems and legal uncertainties faced by businesses, as well as the economic recession facing major trading partners, might eclipse Indonesia's economic recovery.
"If we can maintain the current political stability, an economic growth of more than four percent is easily attainable," Pande told the Post.
"Political stability is a prerequisite for capital inflow, which is expected to help spur economic growth in 2002," Raden added.
Dorodjatun told reporters on Thursday that Indonesia would record an economic growth of "less than five percent" in 2002, compared with this year's target of 3.5 percent.
The relatively high economic growth target would be needed if Dorodjatun wants to realize his priority goal of creating employment.
Raden said that consumer confidence had improved significantly since President Megawati Soekarnoputri took over the leadership on July 23, but it was not yet sufficient to turn the confidence into spending.
"Our survey shows that sentiment is improving very rapidly, but it still takes time to change the sentiment to spending," he said.
According to Raden, strong capital inflow was also expected to stir economic growth next year.
"At present, investment accounts for 16 percent of gross domestic product. If capital inflow increases just by two percent next year, we will register an economic growth of at least 4.5 percent," he said, adding that the first phase of capital inflow was expected to come from local exporters that deposited their money overseas during the country's twin economic and political crises.
Asked about the prospects for foreign capital to enter the country, Anton said that overseas investors would maintain their wait-and-see attitude until they witnessed local firms starting to expand.
"Foreign capitalists will first observe if domestic firms are already operating at their full capacity before they start pouring in funds," Anton said.
He urged the government to expedite the bank restructuring program to allow the industry to resume lending to cash-strapped local companies.
"IBRA (the Indonesian Bank Restructuring Agency) must move fast in restructuring the debts of national banks so that they can become healthy and start lending to national firms," said Anton.
"Some sectors, like manufacturing and pharmacy, have long wanted to increase their running capacity and even expand their operations, but could not do it because of financing difficulties," he said.
He also said that the government had to encourage firms to find non-bank financing sources, such as by issuing bonds.
But he said that national firms had been discouraged in issuing bonds because of the relatively high transaction fee of 0.03 percent.
"The government should scrap the regulation because it discourages cash-trapped firms from issuing bonds," he said.
Anton warned that Indonesia's economic growth would be overshadowed by economic recession facing the country's major trading partners such as Singapore, Japan, U.S. and some European countries.
"Purchasing power in those countries has declined," he said.
Meanwhile, Bustanul called on the government to provide incentives, including tax facilities, for local firms to resume operations or expand.
"The government should waive value-added tax imposed on imported raw materials that are used for exported goods," he said.
Asked about the Dorodjatun's plans to boost the country's credit rating from non-investment to investment grade within a six-month period, Raden said that it would be rather difficult, given the complexity of the economic problems.
"Taking into account the real condition, it is extremely difficult to improve the credit rating from "ccc+" to "bbb+" within three to six months," he said, adding that a more reasonable timetable would be one year. (03)