Local spending to fuel economic growth in 2002
Berni K. Moestafa The Jakarta Post Jakarta
With the current global economic downturn, Indonesia is looking inward for a push to the economy, as the government said on Tuesday it would focus on boosting domestic consumption.
Coordinating Minister for the Economy Dorodjatun Kuntjoro- Jakti said the government had several steps in mind to revitalize the economy at home.
To bolster the local economy, he said the government would prioritize alleviation of poverty, empower small and medium size enterprises, and focus on decentralization.
He did not provide details of the plans.
The government forecast for economic growth next year is set at 4 percent.
Dorodjatun said that despite the world economic slump, the domestic economy remained relatively buoyant on the back of strong consumer spending, and was on track to meet this year's growth target of 3.5 percent.
"While world markets are down, the domestic market is still growing quite fast," Dorodjatun told reporters after a meeting with economic ministers.
He said signs of a growing economy were evident from the rise in electricity, telephone and fuel consumption.
"The growth in the local market has even attracted an influx of smuggled goods like textiles and electronics worth billions of U.S. dollars," Dorodjatun added.
Unlike neighboring countries, Indonesia has been able to post economic growth as the rest of the world has virtually sunk into recession.
Recession began looming after the crash in the U.S. high tech sector early this year led to a slowdown of the world's largest economy.
Southeast Asian countries felt the brunt of the contraction in the U.S. economy, with sharp drops in export revenues.
Singapore and Malaysia, which before had exported their way out of the 1997 financial crisis, found their export markets shrinking without a strong domestic economy to fall back on.
Analysts placed Indonesia among a few others like China and India whose strong local market has helped mitigate the impact of falling export revenues.
But it remains unclear for how long consumer spending could be sustained at current levels and stave off the adverse impact of the global downturn.
Strong export sales coupled with high consumer spending had helped economic growth by 4.8 percent last year.
That might explain this year's strong consumer spending, but as exports have been falling steadily there needs to be other sources to sustain domestic consumption.
Investment is also seen declining, mainly because of the crippled banking sector, and the absence of foreign investment.
Dorodjatun said this year's total investment levels as of Oct. were low as against the previous year.
As of October, the approval of foreign direct investment shrank to $6.47 billion from $13.14 billion in the same period last year.
Elsewhere, Dorodjatun said that the government was preparing measures to curb rampant smuggling activities.
He said the increase in smuggled goods had not only caused heavy losses to the state, but also hurt local industries.
Last week, importers warned that irregularities at the customs and excise office has led to losses of Rp 30 trillion (about $2.8 billion) in uncollected excise revenue each year.
The government, he said, now planned to review its import and export inspection services.
To promote investment in the regions, the government plans to review 3,000 local regulations deemed as burdensome to investors, he added.