Loans, projects to spur growth
Rendi A. Witular, The Jakarta Post, Jakarta
To stimulate higher economic growth through the utilization of the state budget, the government is to speed up the disbursement of massive loan commitments from overseas creditors within the first semester of next year.
The amount of the loans that will soon be disbursed include some Rp 9.9 trillion (US$1.01 billion) of program loans and around Rp 25.2 trillion of project loans, Coordinating Minister for the Economy Boediono said after a Cabinet meeting on Wednesday.
"If we can speed up the disbursement, it will help drive higher economic growth next year, as well as reducing the revolving impact of this year's economic slowdown," said Boediono in a press conference.
The government will accelerate and maximize its spending for projects during the first semester of next year to help stimulate the economy, with the private sector's financing access likely to be hampered by the current tight monetary policy applied by the central bank amid the high inflation and interest rates.
Boediono is optimistic that the private sector will revive investment in the second semester after the central bank starts to gradually lower its lending rates.
The government will also reduce bureaucracy barriers in order to speed up the tender process of projects offered during February's Infrastructure Summit.
Few investors are interested in taking part in the tender due to reasons ranging from bureaucratic constraints to uncertainty over land clearance procedures.
Of the total of 91 projects worth around $22.5 billion on offer in the first edition of the summit, only four even managed to get to the bidding stage, and only one project is currently being carried out.
"We will see what kind of problems are discouraging investors from participating. We will ensure them that the problems will be settled as soon as possible and give ways for speeding up the project construction next semester," said Boediono.
Indonesia, Southeast Asia's largest economy, is facing an economic downturn this year after inflation accelerated to 18.4 percent between January and November, the highest in six years, largely due to the government's decision to raise fuel prices on Oct. 1.
To mitigate the inflationary pressures, the central bank has aggressively raised its benchmark interest rate six times in the last six months, with the current rate at 12.75 percent.
Higher inflation and interest rates have contributed to a slowdown in economic growth and put the brakes on the country's consumption-driven economy, as both consumer loans and credit for business expansion become more expensive.
As part of an effort to anticipate a possible decline in state revenues from taxes following a downturn faced by the business community, the government is also planning to provide several tax incentives and smoothen tax payments and reimbursements.
The Cabinet meeting also discussed issues related to security and the social conditions next year, with Coordinating Minister for Security and Political Affairs Widodo Adi Sucipto highlighting some of the government's focus.
"In general, we will remain focused on settling issues related to terrorism, corruption and drug trafficking next year. The efforts to combat these three crimes will be intensified with an emphasis on results," said Widodo.