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)