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.