Local spending to fuel growth next year

Local spending to fuel growth next year

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.