Govt points to progress, but chronic problems remain

The Jakarta Post Jakarta

A persistently high unemployment rate and the problem of chronic graft in the bureaucracy leading to a high cost economy are overshadowing the current administration's successes in maintaining macroeconomic stability, a government report shows.

The recent soaring of global oil prices and interest rates, meanwhile, could also loom as potential risks that could derail Indonesia's economy, which is projected to produce growth of as much as 6.2 percent this year.

Presenting a report on the country's economic progress during President Susilo Bambang Yudhoyono's first six months in office, Coordinating Minister for the Economy Aburizal Bakrie admitted that unemployment was still high despite economic growth of over 6 percent in the past two quarters, and that the government had not yet been able to address it.

"The rate at which the economy has been growing so far is still insufficient to create enough jobs for the country's unemployed," he said.

"We still need growth of 6.6 percent to be able to halve the unemployment and poverty rates over the next five years."

Indonesia's gross domestic product (GDP) grew by 5.13 percent last year, the Central Statistics Agency (BPS) reported, creating only some 2 million new jobs. The country's unemployment figure currently stands at 10.3 million people, or some 10 percent of the total workforce.

During his presidential campaign, Susilo promised to create 15 million new jobs during his five-year term -- or three million jobs annually -- on an average economic growth rate of 6.6 percent per year.

A recent report from the manpower ministry said 22,647 workers in the formal sector had lost their jobs in the first quarter of this year as companies shut down or downsized.

Accordingly, Aburizal said that the government would therefore push the economy to grow further than its earlier estimate of 5.5 percent for this year, focusing on labor-intense investments in the agriculture, construction and manufacturing sectors.

And the government was upbeat about this, Aburizal said, as the BPS reported earlier this month that Indonesia's economy managed to grow by 6.35 percent during this year's first quarter, following last year's final quarter growth of 6.65 percent -- both on the back of improving foreign direct investment (FDI).

"Investment is picking up, and we expect the trend to continue until the end of the year," he said. "With this, we're quite sure that the economy will be able to grow between 5.8 percent and 6.2 percent this year."

The government, however, still faces a daunting task in improving the country's investment climate, particularly in eradicating rampant corruption and graft throughout the country.

Citing the example of illegal fees at the country's ports, Aburizal said the government would conduct a thorough review of the legal fees charged by ports.

"From there, we will conduct regular, on-site enforcement programs to prevent illegal fees from creeping in again," he said, adding that the government would also review the relevant investment laws to cut the time needed to set up a business from 158 days to 30 days.