Interest and investment

Interest and investment

From Koran Tempo

President Susilo Bambang Yudhoyono has introduced three
economic strategies for the banking sector, namely (i) an average
economic growth rate of 6.5 percent in five years, (ii) creation
of macro-economic stability to drive the real and business
sectors and (iii) fulfillment of people's basic rights.

Investment is necessary if you wish to achieve a growth level
of about 5 percent. It has also been generally accepted that
investment plays a major role in promoting a nation's welfare.

Regarding development undertakings, there may be debate on the
purpose and targets of these undertakings. This debate may also
touch on the limits of growth and the adoption by Third World
countries of the Western model of development or
industrialization. Investment, however, is not usually touched on
in this debate, especially with regards the role it plays in
modernization and industrialization efforts.

Theoretically, we are familiar with consumption-led growth and
export-led growth. The bottom line, however, is that economic
growth is based on whether or not there are investment
activities.

If a country fails to maintain investment growth at a certain
level, for example, to counter its population growth or the
growth of its labor force or even migration to the cities, this
country will first undergo economic stagnation and then economic
decline.

When the economy plunges, this country will face a host of
problems other than the inability to carry out capital-generating
activities. Even the capital at hand will drop because it cannot
be maintained and augmented.

PEBRIJANA SUNARDI

Jakarta