RI's recovery boosts ASEAN's attractiveness

Riyadi Suparno, The Jakarta Post/Kuala Lumpur

Being the largest ASEAN member country, Indonesia's economic recovery would boost the attractiveness of the region as a trade partner and an investment destination, experts said here on Friday.

Manu Bhaskaran, a partner at the Centennial Group Inc. of Singapore, noted that Indonesia's on-track recovery was one factor bringing back investment into Southeast Asia. Others, he said, were the beginning of a new investment cycle and improving competitiveness across the region.

Speaking at the 2005 Euro Conference here, Bhaskaran noted that despite its lingering problems, Indonesia under President Susilo Bambang Yudhoyono had already had more successes than failures.

He said Susilo had given the market a clear direction on where his administration was heading. Combined with a strong anticorruption drive, this had increased business confidence in Indonesia, he said.

The President had also been successful in settling several important overdue problems, including the Cepu oil block dispute with U.S. energy giant ExxonMobil, and had moved to cut oil subsidies, although they remained high, Bhaskaran said.

Corporations were also responding positively to the government's moves to enforce good governance in the public and private sectors, he said. Banks had stepped up lending to small and medium enterprises, and international firms had increased their investments in the region as confidence among foreign investors and donors improved.

Bhaskaran said the country was now on track toward high economic growth of more than 6 percent, a figure that could be reached next year. This would help resolve Indonesia's long- standing problem of high unemployment, he said.

Indonesia's recovery was in line with the robustness of other economies in the region, and this had increased demands for infrastructure projects and the development of other sectors, he said.

Mirando Goeltom, the senior deputy governor of Bank Indonesia, said things were looking good for Indonesia amid sluggish global economic growth, which was mired in uncertainties about the future. However, he cautioned inflationary pressures from the instability of the exchange rate could undermine the country's performance.

Narongchai Akrasanee, Thailand's former minister of commerce, said ASEAN, with its large market of more than 500 million people, represented a huge potential for growth.

However, he also warned that investors were increasingly seeing non-traditional risks emerging from the region, including the SARS epidemic of 2003, the more recent bird flu outbreak, earthquake and tsunami risks, and the remaining high risk of terrorist attacks in some parts of the Philippines, Indonesia and Thailand.

Otherwise, the region was a strong contender to be a major trading partner and investment destination for countries in the European Union, he said.

The EU has in recent years become the largest investor in the region, overtaking Japan and the United States.

Narongchai noted that the establishment of Trans-Regional EU- ASEAN Trade Initiative (TREATI) in 2003 could pave the way for a freer trade between the two regions.

Under the TREATI framework, the two parties have agreed to focus on six areas -- agriculture, fisheries, electrical and electronic goods, forestry, trade and investment facilitation.

Narongchai suggested that the EU and ASEAN consider formalizing their relations through formal institutions, such as an ASEAN-EU joint secretariat, business council and a free trade agreement.

FDI flows into ASEAN

(billions of U.S. dollars) ---------------------------------------------- 1995 2000 2003 ---------------------------------------------- 28.1 23.4 19.3 ---------------------------------------------- Source: ASEAN Statistical Yearbook, 2004