RI's economy on the mend despite ongoing instability
RI's economy on the mend despite ongoing instability
SINGAPORE (AP): Despite continuing political instability and delays in implementing market reforms, the economy of Indonesia - the largest nation in Southeast Asia - is on the mend after a three-year recession, the country's economics minister said.
"By next year, I believe the party will be in full swing," Rizal Ramli said in a speech late Thursday. He predicted foreign investors, who have been keeping Indonesia at arm's length because of political instability, will start returning in 2001.
Addressing a business forum in Singapore held concurrently with this week's summit of the Association of Southeast Asian Nations, Ramli predicted that political instability will subside in coming months.
Ramli said that Vice President Megawati Sukarnoputri had told him she would continue to support President Abdurrahman Wahid, who has been under attack from a coalition of Muslim parties and other hard-liners in parliament.
Without the support of Megawati's party - the country's largest - no effort to impeach the president can succeed.
Continuing separatist conflicts in the westernmost province of Aceh and Irian Jaya, on Indonesia's eastern end - as well as a persistent war between Christians and Muslims in the Maluku archipelago - also have scared away foreign investors.
Ramli said Indonesia's economic growth would be a respectable 4.5 percent this year and possibly rise by another percentage point in 2001.
The sprawling nation is experiencing its first real growth since 1997. In 1998, when the Asian crisis exploded with full force, gross national product plunged by 14 percent. There was no growth last year.
Economists say the current recovery, which reached 5.12 percent in the third quarter, is rooted in increased domestic consumer spending, non-oil exports and in energy exports whose value has rocketed because of rising world oil prices.
Ramli, who became chief economics minister when Wahid appointed a new, streamlined 26-member cabinet in August, said that another indicator of economic strength was the steady expansion in industrial plants' capacity utilization.
Three months ago, average utilization was less than 60 percent, he said. But now it had reached 70 percent and was expected to continue to grow.
Still, the economy is beset by serious problems, including rising interest rates - now amounting to 14 percent. Bank loans have virtually dried up as a result.
Windfall profits generated by oil exports have enabled the government to decrease its budget deficit to only 3.7 percent of GDP this year. The administration plans to push it further down in 2001 through accelerated privatization of government-owned assets, including some of the country's largest banks, Ramli said.
Also, Jakarta will issue bonds backed by revenue from gas sales to Singapore, whose credit rating is much higher than Indonesia's, making the bonds more attractive to investors.