Policy change needed to maintain growth

Policy change needed to maintain growth

JAKARTA (JP): Indonesia's economic growth is likely to
continue declining if the government does not review its current
macroeconomic policies, particularly those on export and import
procedures, an economist says.

Anwar Nasution of the University of Indonesia's School of
Economics said yesterday Indonesia's non-oil and gas exports were
currently at a stagnant level.

This meant the government had to create more deregulatory
measures in the trade sector because current policies did not
support the country's export growth, he said.

The official Gross Domestic Product growth figure of 7.82
percent last year was much lower than the 8.21 percent recorded
in 1995, he said.

Anwar predicted that the economy would continue the same
pattern of the past two years and continue declining if there
were no adjustments in economic policy.

"Continuous deregulations are needed particularly in the
domestic investment and trade sectors," he said, as quoted by
Antara.

Economists earlier this week warned that microeconomic policy
inconsistencies would weigh down the country's macroeconomic
management and eventually cause its economic downfall.

They said many government policies, instead of leveling out
the country's business climate, had caused market distortions and
benefited only certain groups.

But the macroeconomy seemed unaffected by the situation,
giving the impression there was no linkage between microeconomic
and macroeconomic policies.

Nasution said yesterday that many policies in the trade sector
caused disadvantages, such as illegal levies and heavy red tape,
all of which could eventually cause export prices to be
uncompetitive.

Indonesia's total export volume in the January to November
period of last year dropped 12.8 percent to 193.86 million tons
last year from 224.46 million tons in the corresponding period of
1995.

However, the agricultural and industrial sectors recorded a
significant rise during that period, he said.

Nasution predicted this was a result of the government's
"special attention" to both sectors that year.

"Currently our markets are flooded with fresh fruit imports.
This is happening because the government has not given proper
supervision to farmers. As a result the farmers can plant, but
cannot handle plant diseases," he said.

Nasution pointed out that Canadian Agriculture Minister Ralph
Goodale said recently that Indonesia was a potential market for
processed food.

This, he said, indicated that Canada was planning to increase
its exports of processed food to Indonesia.

In 1995, Canada's total exports reached C$113 billion. It
increased by more than 100 percent to C$294 billion last year.

Nasution said Indonesia would merely remain a market if the
government refused to quickly review its policies so domestic
businesses would be willing to operate in sectors such as
agriculture. (pwn)