ADB sees modest growth for RI this year

ADB sees modest growth for RI this year

The Jakarta Post, Jakarta

While investment has yet to pick up this year due to both
internal and external factors, domestic consumption will remain
strong as the backbone of the economy, enough to drive growth by
3.7 percent, economists at the Asian Development Bank (ADB) said.

Amanah Abdulkadir, ADB's senior economic officer, said the
modest forecast was based on the continuing gloomy outlook of the
global economy, coupled with slow progress in improving the
investment climate here.

"So, we cannot hope for much from investment (to drive
economic growth), especially when we see a decline in the global
investment portfolio from time to time. But consumption will
remain strong and be able to push the economy to grow by 3.7
percent this year," she said at a media briefing on Wednesday.

She said that one of the signs of strong consumption was the
constant increase in imports for capital goods.

This means, she added, that local companies are preparing to
increase their output capacity, which will keep consumer spending
high.

Sharing her view was David Jay Green, country director for
ADB's Indonesia resident mission, who said that there were still
plenty of weaknesses that needed to be addressed first if the
country wanted to jack up investment.

Green highlighted at least four reasons why investors had been
shunning the country: one, concerns about security; two, policy
uncertainty, notably on decentralization and labor-related
issues; three, weaknesses in the financial sector; and finally,
weaknesses in governance, as was evident with the presence of
massive corruption.

"All this has resulted in foreign investment in Indonesia was
one of the lowest in ASEAN. In fact, the country had experienced
disinvestment since the crisis," he said in his paper, quoting
data from the ASEAN Secretariat.

As of June 2002, according to the ASEAN Secretariat, the
country lost US$1.2 billion of approved foreign investment.

"That's why one of ADB's main programs to assist Indonesia is
to support and strengthen a long-term growth prospect through
providing investment in infrastructure to help strengthen the
country's financial sector and encourage the private sector,"
Green added.

ADB is an important member of the country's major donors
grouped under the Consultative Group on Indonesia (CGI).