RI's economic growth to lag behind neighbors'

RI's economic growth to lag behind neighbors'

The Jakarta Post, Jakarta

Indonesia's economic growth this year will lag behind that of
other Asian developing countries, the United Nations said on
Friday, citing massive debts cripple the state budget's ability
to stimulate growth.

The United Nations Economic and Social Commission for Asia and
the Pacific (ESCAP) found that Indonesia's economic prospect in
the medium term remained bleak.

"We have to admit that our economic growth will not be
encouraging until 2004. That will hamper efforts to create jobs
for new labor force," former ESCAP economist Prabowo said during
the presentation of the commission's 2002 economic and social
survey of Asia and the Pacific.

He said that while other economies in Southeast Asia would
rebound sharply in 2003 and 2004, Indonesia's growth would likely
stay at around 4 to 5 percent.

ESCAP said an upturn in global demand led by a rebounding U.S.
economy will drive the region's growth.

"This year, the country's economy is expected to grow by 3.8
percent. While the growth figures for the next two years stand at
4.9 percent and 4.6 percent, respectively," Prabowo said.

By contrast, Malaysia and Singapore's economies might grow by
5.1 and 5.8 percent respectively in 2003. While in 2004, he said,
their economies could grow by another 6.1 and 5.7 percent.

Laying the blame on massive public debts, Prabowo said
Indonesia's state budget could not generate enough steam to drive
the economy.

This year about 40 percent of government spending has been
allotted to serve foreign and domestic debt payments.

The government spends less on development than it does on
domestic debt payments, which amounts to around Rp 59 trillion
(about $63 billion).

Almost all of this debt, will go into banks with government
bonds which they took when the government bailed them out from
the late 90s financial crisis.

A central bank official has said that almost 45 percent of
banks' revenue last year was still paid by taxpayers' money.

Official data show the country owes some $130 billion, which
accounts for more than 80 percent of this year's estimated gross
domestic product (GDP) of $160 billion.

That leaves the government with limited options to invest in
the economy, meaning growth rests more with how much the private
sector can spare.

But with an uncertain investment climate, a banking sector in
the doldrums, and companies still undergoing debt restructuring
talks, economists warned against expecting much from private
investors.

At the receiving end of this situation are the poor, Prabowo
said.

Not only will a cut in development spending mean less money
for social welfare programs, but the subsequent slower economic
growth means that not enough jobs are created to absorb the
millions of new entrance in the job market.

ESCAP urged Indonesia secure policies that enhance economic
growth where the state budget cannot.

This translates into pushing ahead with the government's
structural reforms program.

They include the restructuring of the banking and the private
sectors, the privatization of state enterprises, upholding the
supremacy of the law, and strengthening institutions and
governance to support positive business and investment climate.