Advisory agency rejects official GDP estimate

JAKARTA (JP): An economic advisory group yesterday questioned the validity of the government's recent estimate of Indonesia's economic growth, saying that the figures are not supported by sound official statistics.

Arif Arryman, the managing director of Econit, in a statement made available to The Jakarta Post charged the government of overestimating data, particularly that of the agricultural sector.

The head of the Central Bureau of Statistics (BPS), Sugito, and Minister of National Development Planning Ginandjar Kartasasmita announced after meeting with President Soeharto last week that Indonesia's economy last year grew by 8.07 percent, more than the 7.48 percent recorded in 1994.

Based on the Gross Domestic Product (GDP), Indonesia's per capita income was also declared to surpass the threshold of US$1,000.

Econit said yesterday that an economic growth of 7.7 percent was more realistic for the country based on official figures and facts.

"Agricultural growth in 1995, which was estimated at a high 3.96 percent, is not supported by official data from BPS and by the reality happening in the country," he said.

According to Sugito, the GDP growth was attributed to seven of the nine economic sectors considered to have shown rapid growth last year compared to 1994. The other two recorded slowing growth.

Among the fast-growing sectors were agriculture, which was said to have grown by 3.96 percent last year, compared to 0.55 percent in the previous year. The food subsector, which contracted 2.1 percent in 1994, also grew by 4.5 percent last year because of an increase in rice production, Sugito said.

Econit said yesterday the large value put on agriculture, which contributed 17.19 percent to the GDP, in the calculations made the GDP growth seem high.

The advisory group said the official statement concerning the growth of the agricultural sector, which reached a 3.96 percent growth, was incorrect because the food subsector, which contributed the largest portion (53 percent) to agriculture, showed an average growth rate of 1.3 percent per annum in the 1989 to 1994 period. In fact, in 1993 the sector dropped by 1.18 percent and by 2.7 percent in 1994.

"It is therefore strange to say that this sector's growth rate leaped to 4.46 percent in 1995, considering that during that year there were severe shortages of foodstuffs. This can be seen in the soaring prices, or inflation, of foodstuff and the increase in its imports," Arif said.

Econit calculated that rice production, which contributed the most to the food subsector, only grew by an average of 1.89 percent during the 1991 to 1994 period and in fact dropped by 0.12 percent in 1993 and by 3.2 percent in 1994.

"So it is strange to hear that the rice production subsector leapt by 3.8 percent in 1995," Arif said.

Rice production

Rice production, he said, experienced a drop due to the decline in rice field acreage, shifts in the climate and stagnant productivity.

The year 1994 also saw a drop in the productivity of rice mills by 17.1 percent and, in the first nine months of 1995, it dropped further by 46 percent. "This indicates a decline in rice production because local rice is milled by local mills," Arif said.

In addition to this, Econit noted, the government has repeatedly said that there was no, or only small amounts of, rice imports.

"But in reality, Indonesia imported 1.8 million tons last year, which is equivalent to 2.1 million tons of unhusked rice. This means that domestic production is insufficient," Arif said.

Econit calculated that rice consumption from 1991 to 1994 rose by an average of 1.24 percent a year. Based on this trend, consumption would reach 41.5 million tons in 1995, which are equivalent to 48 million tons of unhusked rice.

"If imports reached 1.8 million tons last year, this would mean that rice production reached only 39.7 million tons, or 45.8 million tons of unhusked rice. In other words, rice production went down by 3.15 percent in 1995," Arif said.

This decline, he said, was inconsistent with the Ministry of Agriculture's estimates of rice production last year which was said to increase by 3.8 percent compared to 1994.

Econit said the "inflation" of the figures resulted in Indonesia's economic growth of 8.07 percent last year.

"Based on more realistic calculations of statistical data -- without inflating them -- Indonesia's growth would have reached 7.7 percent at the most," Arif said.

Econit considered that modifying the figures of economic growth was disadvantageous to the country as it reduced the credibility of official statistics, increased money circulation and inflation and might lead to overinvestment.

"Overinvestment could result in excess production capacity which, in turn, could reduce economic efficiency and become harmful in the future," Arif said.

Econit said the state's economic planning agency should perform more professionally and scientifically and avoid "actions which are loaded with political content".

BPS, Econit said, must also act more independently and should not feel it needed to "consult" with various agencies before announcing statistical data.

"BPS' announcements should be based purely on monitoring activities and statistical analysis," Arif said. (pwn)