Government urged to aim for higher growth

Government urged to aim for higher growth

JAKARTA (JP): The government needs to set higher economic
growth targets for the current 25-year development program, to be
ended in 2019, by involving small and medium enterprises as the
prime growth movers.

Joseph Manurung, S. Indro Tjahjono and Aulia Prima Kurniawan,
all engineers graduated from the Bandung Institute of Technology,
said at a presentation of their new book last week that Indonesia
should set an economic growth target of 22 percent (based on
current consumer prices) per annum in order to reach per capita
income of US$14,972 by 2019.

The book, entitled Reorientasi dan Reformasi Menuju Ekonomi
Kerakyatan (Reorientation and Reformation Towards People-Based
Economy), was written to commemorate the 50th anniversary of
Indonesia's independence.

The authors calculated that the government's growth target of
seven percent per annum is equivalent to a 15 percent growth
based on current consumer prices. They said that with the 15
percent growth (based on current prices), Indonesia could reach
per capita income of $3,321 by 2019.

President Soeharto, in his state of the nation address before
the House of Representatives on Aug. 16, revised upward the
growth target for the current sixth Five-Year Development Plan
period (Repelita VI), started in April last year, to 7.1 percent
per annum from the original target of 6.2 percent.

To attain the revised growth target, Soeharto raised the
target of investment during the current five-year plan
development plan to Rp 815 trillion ($360 billion) from the
original target of Rp 660 trillion.

Joseph, Indro and Aulia suggested that, in achieving the
targets, the government should no longer rely on large entities,
which, they said, have benefited a lot from the last long-term
development program.

"To achieve the targets, the government should now empower
small and medium scale companies so that they would be able to
contribute significantly to the country's gross domestic
product," Indro said.

Joseph criticized the government, which, according to him, has
practically ignored small and medium enterprises during the first
long term development program. Therefore, they have been left
further behind by large companies.

"During 20 years since the New Order came to power, the
government has been letting the processes of distribution of
wealth move on by itself, while expecting an automatic trickling-
down from large entities," Joseph said.

He added that during the first long-term development program,
the government spoiled large businesses by giving protection,
monopoly rights and cartel-like associations.

Consequently, he said, large companies practically controlled
the country's production sectors. The top 300 large companies,
for instance, already controlled 80 percent of Indonesia's total
gross domestic products in 1991.

Criticism

Concurring with Joseph's claim, Indro, who is also an activist
at non-governmental environmental organization Network for Forest
Conservation in Indonesia, criticized the way the government
generated funds to develop the country. He said the government
was exploiting too much of the country's natural and human
resources, such as oil and gas, minerals, forests and labor
forces.

He also questioned the government's budgeting policy which
relies on foreign loans to cover its current account deficits.
Ironically, he said, the current account deficits have resulted
mainly from the deficits in services sectors, including the
increasing servicing of foreign debts.

According to the new book, Indonesia has suffered deficits in
its current accounts since the 1983-1984 fiscal year, with annual
deficits averaging $2.718 billion per annum.

The government's servicing of foreign debts has also been
increasing from year to year, the book said. During the third
Five-Year Development Plan (Repelita III), the foreign debt
service accounted for 15 percent of the government's routine
spending per annum. The percentage rose to 38 percent per annum
in the Repelita IV period and to 47 percent in the Repelita V
period.

Quoting the World Bank's data, the book said Indonesia's
outstanding foreign debt increased by 2,090 percent within 20
years from $3.1 billion as of 1970 to $67.9 billion as of 1990,
of which $55.5 billion was owed by the government. The government
has said that currently Indonesia's total foreign debts stand at
some $100 billion.

As a result, Indonesia's debt service ratio is getting worse,
presently standing at 30 percent, which is just below Mexico's,
Brazil's and Bolivia's, and far from the acceptable level of 20
percent. In 1992, the country's debt service ratio was even
worse, standing at an alarming point of 39 percent. (rid)