Government eyes higher growth in manufacturing

Government eyes higher growth in manufacturing

The Jakarta Post, Jakarta

The government aims to boost growth in the country's
manufacturing sector -- the largest contributor to gross domestic
product (GDP) -- to an average of 8 percent per year in the next
five years, from about 5 percent currently.

Speaking to legislators on Wednesday, Minister of National
Development Planning (Bappenas) Sri Mulyani Indrawati said such
growth was needed to help push the economy to grow at pre-crisis
levels.

According to the Central Statistics Agency (BPS),
manufacturing makes up about 30 percent of annual GDP. But,
while it was growing by 10 percent to 11 percent before the 1998
economic crisis, it had not reached those levels since.

"From 1998 onward, the sector's growth averaged about 5
percent. Not only that, the decline has also been highlighted by
capital outflows and relocations of many businesses (out of the
country)," Sri Mulyani said during a hearing with the House of
Representatives' Commission XI on financial affairs.

"We aim to reach 8 percent growth. But obviously we need more
investment flows to do that, especially from the private sector
as the government's financing ability is very limited."

A more robust growth in the manufacturing sector, in which
many companies are labor-intensive, would eventually be
beneficial in helping contain the massive unemployment problem
here, she added.

The country's economy needs to grow by at least 6 percent per
year just to keep up with the millions of new workers entering
the job market annually. However, the slow progress in investment
has hurt prospects for growth.

Investment, or gross fixed capital formation, makes up about
18 percent of total GDP, BPS data showed.

"We aim to increase that to 24.4 percent by 2009. Improved
investment, along with improving exports, is the best answer to
generating economic growth to the pre-crisis level."

She did not elaborate on what to do to attract investment, in
which she added, Indonesia would need well over US$100 billion
over the next five years to reach an average economic growth of
6.6 percent -- the target this government has pledged to meet.

As for exports, notably non-oil and gas commodities, she said
the government wanted to boost the growth from only around 2
percent in 2004 to 8.7 percent by 2009.

With investment and exports improving at that pace, the
economy should grow by 6.6 percent in 2009, added Sri Mulyani.

The economy is likely to grow this year by about 4.8 percent.

Elsewhere, aside from strengthening the manufacturing
industry, the government was also committed to boosting the
performance of the agriculture sector, which is set to decline
this year by 2.9 percent due to a number of problems.

Previously, growth in that key sector averaged 3.3 percent,
Sri said.

Problems that have been detrimental to accelerating growth in
the sector include farmland conservation, massive migration from
rural to urban areas, lack of access to water supplies and
inadequate irrigation facilities.