Looking beyond growth
Indonesia's economic growth last year surpassed expectations. This welcome news was disclosed yesterday (Thursday) by the State Minister of National Development Planning, Ginandjar Kartasasmita, after he reported the fact to the President at the latter's Cendana residence.
This is clearly good news since it means that, when it comes to growth, the government's development strategy has borne fruit. The question now is: What about stability and equalization? We know that each of these three aspects, known together as our development trilogy, is a pillar of development that cannot stand on its own. Greater growth means that more is available for fair distribution among all, which makes for increased stability. On the other hand, growth could also mean greater inequities because the fruits of development are not distributed fairly, which could upset stability.
As far as we can observe, enough has been done by the government to promote equality, yet the results have been far from optimal. According to a World Bank report, growth in eastern Indonesia was 4 percent, which is only half the national average. This clearly is a problem of strategic importance that needs to be resolved.
Another problem of strategic importance concerns our macroeconomic policy. As we can see, last year's and this year's growth are supported mainly by the large inflows of direct foreign investments, which increase our imports of capital goods and the amount of private foreign loans. This, in turn, could swell our current account deficit. To keep the current account deficit within safe bounds, and to prevent capital flight, the government must push exports while restraining the fiscal sector. This could be done by continuing with the deregulation of sectors that hamper exports, and by cutting subsidies that only benefit the small, urban elite.
Attention should be paid to the alleviation of inequities in big cities like Jakarta which could endanger stability. The best way to achieve this is to be transparent in all aspects and enforce the law without discrimination. If this is done, we are sure that even higher growth, better equalization and greater stability can be achieved.
-- Media Indonesia, Jakarta