SME help, investment top govt's platform

Urip Hudiono, The Jakarta Post, Jakarta

With macroeconomic stability almost in check, the government will emphasize microeconomic policies such as empowering small-and medium-sized enterprises (SMEs) and improving Indonesia's investment climate.

The policy, according to Coordinating Minister for the Economy Aburizal Bakrie, will allow the government to pursue expansive fiscal policies by allocating more budget funds for poverty alleviation while maintaining the country's macroeconomic indicators -- mainly inflation levels and deficit -- at a manageable level.

"The efforts to achieve macroeconomic stability since the 1997 monetary crisis have been accomplished," he told a press conference on Wednesday, revealing the government's year-end economic assessment and future outlook.

"Our focus now is integrating the stability with microeconomic activities to achieve better economic growth."

Explaining this year's rise in domestic consumption, trade and investments on the back of stable exchange and interest rates, Aburizal said the government was confident of being able to reach a gross domestic product (GDP) growth of 5 percent this year, higher than the growth target of 4.8 percent.

The economy next year is targeted to expand by 5.5 percent.

It is also projecting an economic growth of 7.2 percent by 2009, which will be sufficient to reduce the unemployment rate to 6.7 percent from the current 9.5 percent.

To attain such goals, Aburizal explained that the government would concentrate on empowering SMEs, which currently absorb 99.45 percent of the country's workforce but have yet to fully contribute to its economic growth.

The government will prepare several policies to assist SMEs in obtaining loans using land certificates as collateral, as well as providing technological assistance and marketing know-how.

"Among the policies are interest rate subsidies for SMEs," he said. "We are also planning to exempt SMEs that have an annual revenue of below Rp 12 million (some US$1,333) from taxes."

Aburizal said the government would also encourage foreign investors interested in the country's major infrastructure development projects next year to cooperate with local SMEs.

The infrastructure project itself is a part of the government's efforts to improve the investment climate and also reform the country's workforce market.

"We will allow outsourcing and contract-based workers," he said. "A rise in workers' minimum wage must also mean their willingness to strive for production will increase."

Workers in several provinces have protested the minimum wage hike which does not cover the minimum cost of living as set by the Ministry of Manpower and Transmigration.

Other pro-investment efforts include reviewing taxation, customs and excise, and regional laws which have been hindering investment.

The government is aiming to increase investment to 28.4 percent of GDP by 2009, from the current 20.5 percent.

Concerning policies to benefit the disadvantaged expressed through the state budget, Aburizal said the government would provide more funds to provide better education and health care services for the poor, as well as develop basic infrastructure.

"The government will maintain the current price of kerosene while planning to increase the price of gasoline and diesel fuel next year," he said, adding that most of the poor use kerosene for cooking fuel.