News Room - Business/Economics

Posted on 30 Oct 2009

Indonesia president targets reforms to boost GDP

Indonesia’s president said today that his administration would focus on eliminating bottlenecks and overlapping regulations to help lift growth in Southeast Asia’s biggest economy to 7 per cent or more by 2014.

 

Indonesia has attracted strong inflows this year, up until recently, into its stocks, bonds and currency, helped by hopes that further reforms in President Susilo Bambang Yudhoyono’s second term starting this month will boost economic growth.

 

But the country faces obstacles ranging from tortuous red tape, unclear regulations and graft to improve the investment climate and lift growth to help cut unemployment and poverty.

 

“There is overlapping and unclear land use. The forestry ministry is in conflict with the environment ministry, there is conflict over energy and natural resources, conflict with agriculture and others,” Yudhoyono said during a speech to open a meeting to finalise his government’s 100-day policy programmes.

 

Partly due to these factors, Indonesia has struggled to attract the levels of investment seen in India and China and also needs billions of dollars to upgrade dilapidated infrastructure, ranging from roads and railways to ports and power plants.

 

The president said there was a need to focus on “de-bottlenecking”, the buzz word in government circles at the moment, to stimulate the economy in the next five years.

 

“I am sure that if we do this our economy will grow, poverty will decline, unemployment will decline, education and health improve,” he said.

 

The goal by the end of his second term in 2014 was for the economy to grow by 7 per cent or more, up from a government target of 4.3 per cent this year, the president said.

 

By 2014, the government saw unemployment and poverty levels falling to 5-6 per cent and 8-10 per cent, respectively, he added, during his speech at the presidential palace.

 

Unemployment is currently 8.1 per cent, while poverty, as determined by the government, stands at around 14 per cent.

 

Yudhoyono said he would be able to check on progress through a new presidential unit which has been set up to help tackle stalled infrastructure projects and push energy and mining agreements between the government and investors.

 

“I have my tools to monitor 24 hours — the presidential delivery unit,” Yudhoyono said.

 

Kuntoro Mangkusubroto, a former energy minister who was appointed head of the new unit, told Reuters in an interview this week that his work would cover a diverse array of problems “from infrastructure to mining” in order to remove barriers to investment in the economy