Healthy competition vital for growth: Experts
JAKARTA (JP): Indonesia needs to complement its very strong commitment to development with a pricing policy and healthy competition to sustain high economic growth for the next 30 years, an expert said.
Peter McCawley, deputy director general of the Australian Agency for International Development (AusAID), said here yesterday that pricing and market mechanism in Indonesia, like in other Asian countries, was still quite distorted.
"The lesson we can derive from our experience over the last four months is the pricing of exchange rates, whether they are overvalued or undervalued," he said referring to the currency crisis sweeping Southeast and East Asia.
Another problem of pricing was in infrastructure, where prices were too low, he said.
"I know this is an old song I have sung since 30 years ago when I said the price of electricity here was too low," McCawley said at a seminar hosted by the Centre for Strategic and International Studies (CSIS).
"If you keep prices badly out of the line for a long time, there are many consequences. So, it is very important to get the prices of infrastructure right," he added.
Besides bad pricing, Indonesia -- like most Asian countries -- is still plagued by market distortions like monopoly and oligopoly.
One of the things the government needs to do in its economic policy is to get the market to work, and then it would become the central issue of economic policy for the next 30 years.
"If you look across Asia, there are many markets that work badly. This is a major challenge for all of us to try to improve the functioning of the market," he said.
McCawley praised President Soeharto yesterday for his strong commitment to development, which he said had contributed largely to the success of Indonesia's economy.
"One of the things he has is a very strong commitment to the nation, to promote the central idea of development. You think maybe it is so simple, it doesn't matter, but it is extremely important.
"I have visited many countries where commitment to development does not exist, and there is a great difference between the countries where commitment to development exist and where it doesn't," McCawley said.
He said Soeharto's commitment to development had resulted in a tremendous 7 percent growth per annum for the country for the last 30 years.
"Don't forget what has been achieved... But it is only a start. What we have to focus on is how we can get 7 percent growth per annum for another 30 years," he said.
He contended that if Indonesia failed to achieve high growth for the next 30 years, it would face enormous problems, ranging from unemployment to environmental degradation and mass poverty.
"I see no way of overcoming mass poverty across the developing world unless we can have sustained economic growth of around 7 percent or 8 percent per annum for the next 30, 40 or 50 years.
"You see from this point of view, I'm not so interested in what the IMF (International Monetary Fund) is doing in Indonesia right now. Of course it is important for short-term measures. But the main goal is to return to the high rate of growth," he said.
He noted that the emphasis on growth would not automatically neglect equal distribution of wealth among people as both issues could be addressed at the same time.
"I don't think there is a conflict, we can pursue a policy to sustain high growth and improve income distribution at the same time. And we should pursue both at once," he said.
He said he was "cautiously optimistic" about the prospects of Indonesia's economy.
He suggested that Indonesia keep going ahead with its economic reforms, which are supported by the IMF, but without in any way sacrificing growth.
"The single most important lesson for economic policy makers is always concentrated on good policy to promote long-term economic growth. We must keep our eye on that main goal," he said. (rid)