Report on Indonesia
Report on Indonesia
The 1997 World Bank Report on Indonesia, titled Indonesia
sustaining high growth with equity praises the country's economic
fundamentals but also strongly cautions the significant risks
ahead, especially those related to external balance with rising
private foreign borrowings.
The report, issued here yesterday, will serve as the main
briefing on the latest Indonesian economic situation for the
creditors grouped in the Consultative Group on Indonesia (CGI)
which will meet in Tokyo in the middle of next month. The World
Bank -- the coordinator of the CGI creditor consortium --
reminded the government of the urgent need for a more vigorous
pace of deregulation measures and for consistency and high
discipline in the enforcement of previous reform packages.
Slightly different from the 1996 report, the latest report
addresses macroeconomic development and future growth prospects
and devotes much attention to three sectors: human resource
development (education, health); hard or physical infrastructures
(power, telecommunications, transportation) and soft
infrastructures (incentive framework, business practices, legal
and institutional arrangements).
Most of the policy recommendations are not new, but the
repetition of similar suggestions already made in previous annual
reports, reemphasized with higher urgency.
The latest report, for example, stresses the urgent need for
better governance and an improved legal system. It highlights the
importance of good governance in reducing the cost of doing
business, sustaining investor confidence, maintaining
international competitiveness and improving equity.
The World Bank highlights what the general public,
particularly businesspeople, have long complained about: the very
small improvements made in the complex web of domestic
restrictions, fees and levies. It also highlights the widely held
perception that the invisible costs of doing business in
Indonesia are very high. This reminds us of one of the main
themes of the election campaign by the three political parties
last month -- the eradication of corruption.
The government was once again warned of the great dangers of
policy inconsistency and the seemingly slackening pace of
deregulation measures. The World Bank also took serious note of
slippage in the implementation of reform measures already
launched, showing that 800 of the announced tariff cuts were not
implemented on schedule and deregulation in some sectors was made
rather meaningless by new restrictive rulings.
It is not our intention to paint a bleak outlook by citing all
of the warnings. In fact, it is such policy recommendations,
besides the shiny figures and indicators, which make the World
Bank Report a reliable reference to Indonesia's economic problems
and prospects. No one has any doubt of the reliability of the
quantitative and qualitative analyses contained in the report.
After all, the World Bank resident staff in Jakarta is one of the
bank's largest country offices in the world which in part
reflects Indonesia's position as one of its largest borrowers.
Even though the annual report is prepared mainly for CGI
members, private-sector analysts, bankers, portfolio and direct
investors as well as credit rating agencies certainly appreciate
such a comprehensive briefing. The report is a great help in
keeping them posted of Indonesia's latest economic situation. For
investors or bankers, the ability to reliably assess the economic
situation of a country as large as Indonesia with over US$100
billion in foreign debts is very important in the current era of
economic globalization.