RI's high growth sustainable, economist says

JAKARTA (JP): Economist Dorodjatun Kuntjoro-Jakti predicted yesterday that Indonesia would continue to sustain high economic growth in the years to come and contain inflation at one digit.

At a business lunch here, Dorodjatun said Indonesia had invested heavily in human resource development and infrastructure.

"We believe we can sustain high economic growth because we have invested heavily in education and infrastructure," he said at the lunch arranged by the Economic Association of Indonesia and India.

Indonesia recorded an annual economic growth of over seven percent in the last three years, 7.5 percent in 1994, 8.2 percent in 1995 and 7.8 percent last year.

Dorodjatun, who is also dean of the Djakarta School of Economics, University of Indonesia, predicted a 7.6 percent growth this year and 8 percent next year.

Inflation would be contained six to seven percent per annum, thanks to improvements in infrastructure and distribution networks, he said.

Indonesia's inflation dropped from 9.24 percent in 1994 to 8.64 percent in 1995 and 6.47 percent last year.

He said it would be difficult to check inflation below five percent unless the government encouraged more development outside Java.

He said the government could develop more infrastructure outside Java to attract more capital from Jakarta, where 60 percent of the country's money circulates.

"As we spread development from Java to the other islands, we can reduce inflation because one cause of it is too much money in Jakarta," Dorodjatun said.

He said he welcomed the government's initiatives to develop sub-regional economic zones involving islands outside Java and neighboring countries.

Currently, Indonesia participates in the Indonesia-Malaysia- Singapore Growth Triangle, the Indonesia-Malaysia-Thailand Growth Triangle, the Brunei-Indonesia-Malaysia-the Philippines East ASEAN Growth Area and the Australia-Indonesia Development Area.

Such growth areas would help spread funds outside Java or from overseas to those growth areas, he said.

To further reduce inflation the government could help the private sector expand their distribution networks to ensure the smooth flow of goods across the country, he said.

He said Indonesia had developed efficient distribution networks during the last 25 years.

"The supply of goods is getting much better, and we see a more similar pattern of inflation all the way from Aceh to Irian Jaya, in comparison to 30 years ago, thanks to a better distribution system," he said.

"As the value added contribution of trade increases, we are emerging not only as a newly industrialized economy but at the same time a commercialized economy," he said.

Middle class

Although Indonesia recorded high economic growth during the last 25 years, the country has not yet produced a significant middle class, the base that is usually the driving force for a country's political reform, he said.

"When you sustain such a high growth for such a long time, you end up with political pressures in the society from a group of people who demand more improvements to the political system. Where are these people?" Dorodjatun asked.

He said Indonesia had a long way to go before it would see a solid homogeneous middle class because of its pluralistic society.

He said what Indonesia had now was a middle strata -- not a middle class -- in which people lived a similar life style but did not share a common political perspective.

This group enjoyed a better quality of life, but were still unable to initiate political reform, he said.

"It is difficult, therefore, to mobilize them into a united force for championing political reform and greater government accountability," Dorodjatun said. (rid)