Economy grows robustly

Economy grows robustly

The provisional estimate by the Central Bureau of Statistics
put the growth of Indonesia's economy in terms of gross domestic
product at 7.34 percent last year. That figure far exceeded the
most optimistic projections of between 6.5 and seven percent made
by most private-sector economists. But, as the bureau explained,
its estimate used the 1993 figures as the base year instead of
the 1983 figures on which most analysts had made their
projections. The bureau acknowledged that its own estimate would
have come out at 6.81 percent, or close to the private-sector
economists' projections, if it had been based on the 1983
figures.

As the change in the base year resulted in a much higher
figure one might suspect that the government statistics agency
deliberately fiddled with its data to get an impressive record to
announce to the public.

However, such suspicion is totally unwarranted. We do not
think the bureau would ever play games with such a key economic
indicator. Instead, we are impressed by the great efforts of the
agency to maintain its credibility by gathering as objective,
accurate, up to date data as possible without any obligation to
satisfy anyone.

Indeed, because the economy has been undergoing significant
changes in its structure over the last 10 years, 1983 is no
longer relevant as the base for calculating the national output
account.

The changes in the economic structure have been so rapid and
so extensive as a result of the massive economic reform which was
started in 1985 that the sectoral shares in the GDP and the
sectoral weighted growth have significantly changed as well.

We highly appreciate the efforts by the bureau to steadily
improve the reliability and relevance of its statistics. For
example, the agency also is now working to change the composition
of the commodities used in the consumer price index to get a more
reliable measure of inflation.

As foreigners pour billions of dollars into the emerging
market countries like Indonesia, the availability of more up to
date, reliable economic data has become one of the factors
considered in picking the place of investment. Economic
statistics which are timely, accurate, comprehensive and
objective are crucial for investors wanting to analyze business
prospects and risks. Calculated risks are the factor that makes
business investment different from gambling.

As the statistics bureau chief, Soegito, explained, the
sectoral shares in Indonesia's GDP have changed greatly over the
past decade. Between 1983 and 1993, the contribution of the
agricultural sector to the GDP declined from 22.9 percent to 17.9
percent and that of the quarrying and mining sector dropped from
20.8 percent to 9.6 percent. There is nothing to be deplored in
these changes as they have been expected and are in line with the
direction of the well planned economic development. But the
contributions of the manufacturing sector grew impressively from
12.7 percent to 22.3 percent, the trading, hotel and restaurant
sector from 14.7 percent to 16.8 percent and the banking and
financial services from 5.3 percent to 7 percent.

We are nonetheless worried about the agricultural sector, not
because of the sharp decline in its contribution to the GDP, but
rather due to its very low growth rate, a mere 0.32 percent last
year. It is easy to find an excuse in climatic changes which are
beyond our control. For example, the decline in the national rice
output over the past two years has been blamed mostly on
unfavorable weather.

We should not forget that despite its smaller contribution to
the GDP, the agricultural sector remains the largest single
employer and is the bastion of our food security that is crucial
for our social and political stability.

It is deplorable that, amid the overall robust growth of the
economy and the increasing attention given to high technology in
pursuit of higher value added, the productivity of such a basic
sector has not improved much. Why does agro-business, which has
always been praised as one of the most potentially promising
sectors, remain a laggard? Why have farmers consistently
complained about the extreme shortage of high-yielding seeds for
food and horticultural crops? Research on high-yielding seeds, we
think, is no less important than that done in the high-technology
sectors. It is to be hoped that the extremely dissatisfying
performance of the agricultural sector will force our agronomists
and other research and technology institutes into meaningful
retrospection on the priorities of their working programs.