`Macroeconomic gains yet to boost growth'

`Macroeconomic gains yet to boost growth'

The Jakarta Post, Batu, Malang

The current strengthening of the country's macroeconomic
indicators has yet to be converted into robust growth in the real
sector of the economy due to lingering problems in other areas,
Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti
said on Sunday.

He said that to help turn around the situation, the business
climate at home must be improved through the acceleration of
economic reform.

Dorodjatun was speaking at the opening of the 15th annual
congress of the high-profile Indonesian Economists Association
(ISEI).

Since the beginning of the year, the rupiah has been rapidly
appreciating against the U.S. dollar, largely due to the
weakening of the greenback against major currencies. The
strengthening of the local unit has greatly contributed to the
current benign inflation environment. This situation has allowed
the central bank to continue cut down its benchmark interest
rate.

Dorodjatun acknowledged that the increasingly stable
macroeconomic picture has created a virtuous circle within the
economy as the stronger local unit has attracted a bigger flow of
portfolio capital, which facilitates the government's
privatization and asset divestment programs.

He added the declining trend in the Bank Indonesia interest
rate has reduced the government's burden in servicing its huge
domestic debts.

But private sector investment still lags behind due to various
uncertainties, he said.

Dorodjatun explained that to help remedy the problem, the
government was determined to press ahead with reform programs
aimed at boosting the investment climate and reinvigorating the
real sector.

He said that one of the programs were to push banks to
allocate a greater amount of credit to the small and medium-sized
enterprises (SMEs).

He said that for 2003, the amount of the bank loans to the
SMEs sector was estimated to have increased to Rp 42 trillion,
compared to around Rp 32 trillion allocated last year.

Another effort was to revive the development of key
infrastructure projects which were stalled in the wake of the
late 1990s economic crisis, Dorodjatun said.

President Megawati Soekarnoputri last week relaunched dozens
of the stalled projects.

Dorodjatun said that another area of reform was boosting
institutional capacity. "This is an ongoing process," he said,
pointing out as an example that improving the legal system could
not be done overnight.

He added that currently there were around 50 bills relating to
the economy and investment sector awaiting to be approved by the
House of Representatives. If the bills were approved, legal
certainty in the country would "be much better".

ISEI chairman Bambang Sudibyo had similar view, saying that
the poor investment climate at home prompted foreign investors to
put a risk premium on Indonesia.

He said that the current ISEI meeting would be closely
followed by the public as the economists grouping was expected to
come up with ideas on how to resolve the pressing problems of the
economy particularly as the country was about to end its current
program with the International Monetary Fund.