Economists hail policy to boost private sector's role
JAKARTA (JP): Experts have hailed the government's policy initiative to give the private sector a greater role in the recovery of the country's economy, saying the move would encourage greater investment.
However, they also warned that there were still many problems hampering the business sector.
"With this policy, the government is going in the right direction," economist Djisman Simandjuntak of Prasetya Mulia told The Jakarta Post on Saturday.
"The policy should make doing business more attractive and should boost both domestic and foreign investment," added Dibyo Prabowo, an economist at Gadjah Mada University.
President Megawati Soekarnoputri stressed the crucial role of the private sector in helping the economy recover during her speech at the House of Representatives plenary session on Friday when unveiling the 2002 state budget draft. The draft budget cut government spending, with a huge amount of the budget allocated to servicing overseas and domestic debts.
"The recovery of our national economy will become an initial step to creating jobs and alleviating poverty. It must be admitted that the realization of these objectives will mainly be determined by the role of the private sector," Megawati said.
Economists said that the conservative 2002 budget could not be expected to make a major contribution to the targeted 5 percent economic growth, thus the private sector should play a greater role by increasing exports and investment.
Stronger investment and export performance should also bode well with the government prioritizing the creation of more job opportunities for the millions of Indonesians left unemployed in the wake of the mid-1997 economic crisis.
The economists warned, however, that lingering security problems and weak law enforcement may force the private sector to withhold investment.
"The government should address security problems and poor law enforcement if it wants to count on the private sector for economic growth," Dibyo said.
He also urged the government to simplify procedures in order to help boost exports, particularly with exporters expected to face tougher times amid an economic slowdown in developed countries.
"Export procedures and requirements are still too lengthy and complicated," he said.
Djisman called on the government to eliminate investment barriers, which had grown consistently as reflected by the increasing volume of capital goods imported over the past two years.
He also said that immediate action must be taken by the government to accelerate the restructuring of corporate debts to help local companies resume operations.
Experts have said that, unless the corporate debt problem is resolved, banks would continue to be reluctant to resume lending to the business sector.
Meanwhile, businessman Djimanto, who is also an executive at the Indonesian Employers Association (Apindo), called on the government to immediately take action against excessive implementation of the regional autonomy policy because many regional administrations had issued new rulings implementing taxes and duties, thus creating significant burdens for businesses.
Djimanto said the new regional taxes were basically levies which drove costs up and cut sales, making it very difficult for companies to operate.
"Those regulations are proof that the country's bureaucrats and lawmakers have no sense of business," he said.
Previously, the Indonesian Chambers of Commerce and Industry (KADIN) also voiced similar concerns, pointing out that there were over 1,000 regional rulings which had seriously hampered investment.
Elsewhere, Djisman dismissed fears that the planned increase in fuel and electricity prices would curb investment, saying the prices of fuel and electricity in Indonesia were still the lowest in the world.
Megawati said in her budget speech that fuel prices would be raised by an average of 30 percent, possibly in January, as a consequence of the governments plan to further reduce the fuel subsidy and hence reduce pressure on the state budget.(03)