Kwik optimistic economy will grow by 3.8% this year

Kwik optimistic economy will grow by 3.8% this year

JAKARTA (JP): Coordinating Minister for the Economy, Finance
and Industry Kwik Kian Gie expressed optimism on Wednesday that
the 3.8 percent economic growth target in the April-December 2000
budget year would be attained.

Kwik said that a 3.8 percent gross domestic product (GDP)
growth level would be crucial to creating more employment,
promoting investment and ensuring that domestic banks could
achieve a minimum 8 percent capital adequacy ratio (CAR) by the
end of next year.

"The 3.8 percent economic growth target in the April-December
2000 period can be obtained and can even be surpassed," he told
reporters after a Cabinet meeting.

Kwik's comments were made amid increasing concern that the
government might not be able to meet the GDP growth target this
year, particularly due to the slow progress of the bank and
corporate restructuring programs which discourage investment, a
key factor for economic growth.

Indonesia's economy plunged into a deep recession in 1998
following the financial crisis that started in the middle of
1997.

While the five-month old administration of President
Abdurrahman Wahid has been credited for its success in dealing
with the political turbulence and empowering civil society,
analysts are still concerned about the slow progress of the
development of the ailing economy.

But Kwik said the economy reached rock bottom in the second
quarter of last year, although 1998's full year GDP growth was
relatively low at 0.2 percent.

Kwik conceded that a smooth progress in the government's bank
and corporate restructuring program was the key to attaining the
economic growth target.

He said that restructuring the ailing banking sector was
pivotal to allowing new lending in order for the real sector to
grow.

He added that restructuring the foreign and domestic debts of
the corporate sector would ensure the resumption of both domestic
and foreign bank lending.

"The resolution of private sector overseas debt will help
reopen access to overseas financing sources," he said.

Kwik said that the economic growth in 2000 would, in
particular, be led by consumption spending and exports.

A higher-than-estimated oil revenue is expected to provide the
government coffers with a huge windfall and will allow for
greater spending to stimulate the economy.

Kwik admitted that investment would not yet be significant
despite the massive potential as reflected in the low ratio of
realized foreign investment and approved foreign investment.

Kwik said that foreign investment this year would increase,
while domestic investment by both the private sector and the
government would remain stagnant or even decline.

But he added that it would be difficult to push foreigners to
realize their investment plans this year, particularly due to the
looming uncertainty about the country's political situation and
the fact that foreign investors might be more interested in
acquiring existing assets at bargain prices rather than embarking
on greenfield projects.

Kwik said that creating transparency in economic policy and
legal certainty was another important factor to encouraging
investors to realize their plans.

Kwik explained that even if the corporate restructuring
program did go well, new bank lending would likely not be
channeled into new investment ventures but into manufacturing
plants that were suffering from idle capacity due to the lack of
working capital loans.

He said that in terms of supply, economic growth in 2000 would
be particularly fueled by industry, and the agriculture and
services sectors. (rei/prb)