Toward better economic growth and justice

Toward better economic growth and justice

Dorodjatun Kuntjoro-Jakti, Coordinating Minister
for the Economy, Jakarta

Now let me turn to the agenda for 2003.

The government's program for 2003 is based on the action plan
we presented to the House of Representatives last year.

In brief we expect to shift our focus from macroeconomic
stability that was the focus in 2002 to macroeconomic issues in
2003.

More specifically we have identified three program priorities.

The first is increasing investment, exports and employment.
The second is continuing to reduce the burden of foreign and
domestic debt. And the third is increasing investment in
infrastructure to support accelerating economic growth.

A more extensive description this program can be obtained from
the Coordinating Ministry's website. The Minister of Finance, the
Minister for State Owned Enterprises, and the Chairman of the
Investment Board (BKPM) will fill you in on efforts to improve
the investment climate, reduce debt and accelerate infrastructure
in their remarks later this morning.

But this effort has to be aimed at something, and that
something is the elimination of poverty and the threat of poverty
for all Indonesians.

This is no simple task, it combines effective macroeconomic
policy that accelerates growth and controls inflation with
government expenditure programs to improve education, health and
infrastructure and an assessment of the role that government
policy in whatever area may have on poverty. I am pleased to
report that we have made significant progress on a Poverty
Reduction Strategy and this should assist us in addressing these
goals by mainstreaming our poverty focus.

However we have to admit that reducing poverty or even holding
our own is going to be difficult this year. The bombing on Bali
has put in jeopardy the livelihoods of hundreds of thousands of
people and will increase poverty here and in the rest of
Indonesia, perhaps dramatically especially with continuing
uncertainty in the international environment and relatively
modest growth here in Indonesia.

The Coordinating Minister for Social Welfare will address the
situation on Bali and our attempts to deal with it. However, I
want to emphasize three things.

First, we need the help of the international community in
dealing with the aftermath of this serious tragedy. Second, in
addition to humanitarian and development assistance we need help
upgrading security, including training and equipment for the
institutions involved. And third, we ask that you to consider
carefully the merit of the travel warnings in place.

I am sure that you agree that the security situation here on
Bali is substantially improved, that we have done a remarkable
job in tracking down the terrorists involved. We know the
importance that all nations place on the lives of their citizens.

However there is an economic dimension to the fight against
terror.

With your assurance that it is now, with the proper
precautions, okay to return to Bali and Indonesia. The economy on
this island and all Indonesia can grow faster, providing us the
breathing space to advance the difficult and far reaching reform
agenda ahead.

As I have indicated reforms have not proceeded evenly. We are
pleased with our macroeconomic progress but know that we can not
sustain it if we do not make progress on governance.

In fact two of the most difficult areas for reform areas are
on the table this CGI including the justice sector and forestry.
While thus far we have made disappointing and uncertain progress
in reforming our legal institutions we believe that the pace of
reforms is picking up.

I think you will be interested in our presentation of an
interesting institutional audit being undertaken by the Supreme
Court, and of developments with the Judicial Commission.

Unfortunately reforms in forestry sector have proven to be
extremely complex and difficult as they cross-cut interests in
the central government and the regions. We must persevere in
finding practical and effective ways to deforestation which has
been accelerating and even begin to repair the damage. The key of
course is to prevent illegal logging.

It is now clear that this will require looking at the
structure of the logging industry, the regulations and their
implementation. The Ministry of Forestry will present the
priority programs required to do this and the Coordinating
Ministry will work with them to develop an inter-agency taskforce
[forum] in this important sector.

Progress in the area of decentralization has on the whole been
better. For example, we are pleased that we have received almost
all regional government budgets.

This should give us a better picture on how government
resources are being used as regional governments fund development
priorities subject to the oversight of their own legislatures and
citizens.

I also expect to continue our dialog on on-lending, local
regulatory regimes and procurement improvements. We need to do
more on regional barriers to trade and investment but we believe
that the local governments are learning the importance of
responsible policy here.

We intend to accelerate this process with the introduction of
improved an improved rating system that will allow regional
governments to assess their performance relative to their peers.
This should assist the private sector and regional governments in
finding a better and perhaps more transparent balance between
revenue needs and business and consumer interests.

In another session tomorrow morning, the National Development
Planning Minister and the Finance Minister will look at the
issues in aid effectiveness.

It is clear that this government and the next one are going to
suffer from relatively limited resources. The key is to make the
best of them. This goes beyond aid effectiveness to the use of
all government resources. We need to use our own and the
resources we receive from you more effectively, we need to
monitor them more closely, and evaluate what has been achieved
better.

Tomorrow we will share our thinking and programs in this area
and look forward to a dialog on this topic.

Finally let me add my appreciation to those of you who have
been working with us on debt swaps. The programs here are win-
win.

We are delighted to reduce our debt stock as that is one of
our key programs. At the same time this program allows your
governments to dedicate the resources saved to critical programs
that you support. For example we now have a program with the
German government that exchanges debt liabilities for increased
assistance to basic education and we are working on another such
project with them. The government would like to continue and even
expand this effort in the year ahead.

From a macroeconomic perspective, despite a number of setbacks
and remaining areas of concern, last year's economic outcome was
positive and puts us in a position to push ahead with a
microeconomic agenda designed to reduce "high-cost" economic
barriers and thereby improve the investment climate. However, we
have to be realistic.

The government's resources, financial and human are scarce,
and we are not as good at making our case to the public as we
would like. It does us no good to promise, nor for you to ask for
more than we can deliver. We need to set realistic targets,
targets that recognize that 2003 is the run-up to an election
year.

We expect that by mid year the world economic situation will
begin to clear and that investment and growth will continue to
pick up but there are no certainties. Government policies are
going to be subject to a political microscope.

We need to prioritize our efforts carefully, focus on the most
important areas for improvement and then execute the reforms
needed to keep momentum. To do this we will need to work
effectively with our friends in the CGI and improve coordination.
We ask for your continued financial support and assurance as
Indonesia moves forward on its reform agenda.

The above is the minister's address to the two-day meeting of
the Consultative Group for Indonesia which opened in Nusa Dua,
Bali on Wednesday.