RI economy defies trend, grows by 3.5%

RI economy defies trend, grows by 3.5%

Berni K. Moestafa and Febiola Desy Unidjaja, The Jakarta Post, Jakarta

Defying the negative trend of its regional peers hit by the
global economic slump, Indonesia's economy grew by around 3.5
percent for the whole of last year, the government said.

"This relative good performance can be attributed, among other
things, to the strong growth of the domestic market, pushed by
demand for consumer goods and by local investment," a statement
of the office of the coordinating minister for the economy said
on Thursday.

It marked the first official statement on last year's economic
growth rate, albeit using a preliminary figure.

With 3.5 percent, the economy as measured by Indonesia's gross
domestic product (GDP), grew slower than it did in the previous
year, when it grew 4.8 percent.

Some other Southeast Asian economies were expected to grow at
a far lower rate, with some others contracting.

So far, Singapore came in the worst with a 2.2 percent
contraction of its economy last year. Thailand and Malaysia may
still record a modest growth of 1.5 percent and 3 percent
respectively, but lower than what they had projected for last
year.

The sharp downturn in the world economy is to blame, led by a
plunge in the high tech sector among developed nations.

Even before the Sept. 11 terrorist attacks on the United
States, most Southeast Asian countries were reeling from slower
exports.

Indonesia is among the few Asian countries like China and
India, that have been the least affected by the shrinking high
tech markets.

Sales of products like shoes and agricultural commodities
remained relatively strong, including into the U.S.; still the
number one export market for Indonesian products.

The global economic slowdown did take its toll on overall
export sales, which fell 8.25 percent in the first 11 months of
2001.

Foreign direct investment also shrank. Companies consolidating
their operations worldwide, dropped expansion plans, with others
avoiding investing in emerging markets.

Foreign investment approvals last year fell by a hefty 49
percent to US$6.5 billion as of October, the government said.

Analysts said this drop could be traced to both the downturn
in the global economy and the continued adverse investment
climate here.

Foreign investors moved to the sidelines during the political
turmoil of the first six months of the year preceding President
Abdurrahman Wahid's ouster last July.

As political stability returned concerns have now shifted to
the country's weak legal system and threats to its security.

But in the same period that foreign investment plunged 49
percent, local investment approval surged 61 percent to Rp 71
trillion (about $6.8 billion).

The figure reflected a strong domestic market, which the
government said had generated growth in all business sectors.

"High growth rates were recorded in the power sector, the gas
sector, the clean water sector, the transportation and
communications sector and the trade and manufacturing sector," it
said.

Some analysts said Indonesia's ability to maintain growth was
mostly due to the fact that its economy was still climbing out of
the lows that came with the 1997 financial crisis.