Economist warns of growing deficit in service sector
Economist warns of growing deficit in service sector
JAKARTA (JP): Continued growth of the service sector deficit
will kill the national economy if no immediate action is taken to
curb it, senior economist Dorodjatun Kuntjoro-Jakti warned
yesterday.
At IPMI management institute's graduation ceremony, Dorodjatun
said the service sector deficit was almost alarming.
"If the growth in the deficit in the service sector continues,
the country's current account deficit will be red light, or no
longer yellow light as said by minister Mar'ie," he said.
Minister of Finance Mar'ie Muhammad acknowledged late last
month that the current account deficit had a yellow light
warning.
The minister said Indonesia had a $4.52 billion current
account deficit for the April to September period.
Mar'ie said the current account deficit was attributed to a
US$6.65 billion services deficit, with a $2.55 billion deficit in
freight services and $1.39 billion deficit in government debt.
The merchandise trade surplus dropped to $2.13 billion, down
from $2.24 billion for the same period last year. The trade
surplus was far short of the $6.65 billion deficit in services.
"Thus, our current account deficit expanded because our
surplus in trade could not balance the deficit in services,"
Mar'ie said.
The current account deficit, which nearly doubled to $6.9
billion for the 1995/1996 fiscal year over the previous fiscal
year, is estimated to grow to $8.7 billion for 1996/1997.
Dorodjatun said restructuring of the service sector was the
only way the government could reduce the sector's deficit.
All the country's 160 defined services, except those on
tourism, had deficits, he said, adding that sea transportation
deserved special attention for its huge deficit.
He said the government should not encourage joint ventures or
strategic alliances with foreign service companies when it
restructured the sector.
Strategic alliances mostly benefited foreign partners rather
than locals, Dorodjatun said.
He said Indonesia should pay more attention to improving its
service sector before giving foreigners more access.
He acknowledged the country should follow the service sector's
trade liberalization trend, either through regional arrangements
such as the Asean Free Trade Area, Asia-Pacific Economic
Cooperation forum or the World Trade Organization.
"But the government should take care so that opening the
service sector to foreign companies does not hurt local players,"
he said.
He said the private sector should improve its staff to compete
amid free trade.
"Free trade cannot be avoided so everybody must prepare to
face the free competition era," Dorodjatun said. (hen)