Call in Defense of Indonesia’s Economic Prosperity

27 , 2012 | Source: The Jakarta Globe

President Susilo Bambang Yudhoyono has instructed his cabinet ministers to focus on six priority areas in anticipation of a possible escalation of global economic crisis amid signs that China and India have now experienced a slowdown in growth.

The president ordered the ministers to give more attention to boosting economic growth, creating a substantial number of jobs, stabilizing food-crop prices, enhancing food resilience strategies, eradicating poverty and boosting energy security.

“Those are the six priority areas to which we must pay greater attention over the next couple of years,” Yudhoyono said on Friday during a retreat at the presidential palace in Bogor.

Europe’s debt crisis has caused sharp declines in exports from China and India, signs that Indonesia must anticipate similiar developments early enough to avoid jolts to the economy, Yudhoyono said.

China and India are among Indonesia’s biggest export markets for commodities such as crude palm oil and coal, and weak demand from Europe suggests that manufacturing is declining. Recently, prices for coal and palm oil have been falling amid the global slowdown.

As long as commodity prices remain stable, Indonesia does not need to worry because even if global prices decline by 20 to 25 percent, “we can still grow way above 5 percent given that investments in mining and plantation sectors are growing markedly,” economist Dradjad Wibowo said.

The government forecasts the economy growing by 6.5 percent this year, the same rate as in 2011.

In terms of boosting growth, Dradjad said “Indonesia is well on track” to becoming a high performer, thanks to rapid expansion of the middle class.

He said the commodities boom has enhanced growth in the financial sector and at the same time is boosting other sectors such as transportation, telecommunication and property.

In order to manage Indonesia’s triple deficits — budget, trade and current account — the government needs to ensure faithful implementation of the strategies to strengthen growth, stability, equity and sustainability of the economy, Dradjad said.

In terms of stability, Indonesia must be extremely careful because of the deficits, he said. “Our triple deficits must be handled prudently” and those deficits could pose a danger to the economy should the global situation worsen, he warned.

In terms of equity, Indonesia looks a bit weak because despite the rapid expansion of the middle class, there are still “pockets of poverty” in many parts of the country with many people still living on $1 a day, Dradjad said.

Better distribution of the benefits of national development should feature highly in the government’s priority list, he noted.

In terms of sustainability, Indonesia needs to pay more attention to the development of alternative energy sources as its reserves of fossil fuels diminish.

But above all, the government must provide more infrastructure to get the economy moving faster, Dradjad said.

The president said Indonesia has great investment potential but investors often complain that the business climate is still not conducive to long-term and large-scale investments. Barriers include lack of legal certainty and policy consistency, he said.

Yudhoyono also said that some of his policies may appear unpopular, but the government will ensure that weaker segments of society will be properly protected. He was referring to the state’s plan to raise energy prices next year.

He said that ministers must remain loyal to their oaths of office to do the best for the nation as the domestic political environment intensifies next year ahead of the 2014 legislative and presidential elections.

Latif Adam, a researcher at the Indonesian Institute of Sciences (LIPI), said that Yudhoyono should have given these instructions a long time ago because it is now very close to the next presidential elections. Ministers from political parties are likely to be obedient, but they may not take such instructions seriously because they will need to think of their own fate in the post-Yudhoyono era, Latif said.

Yudhoyono, in the third year of his second five-year term, has said that ministers who pay attention to their political parties while neglecting their office job should resign.

The president is assisted by 34 cabinet ministers, 18 from political parties — five from the ruling Democratic Party, three from Golkar Party, three from National Mandate Party, three from Prosperous Justice Party, two from National Awakening Party, and one from National Development Party.

The ministers directly in charge of the six priority areas are Coordinating Minister for the Economy Hatta Rajasa, Coordinating Minister for People’s Welfare Agung Laksono, Trade Minister Gita Wirjawan, Tourism and Creative Economy Minister Mari Pangestu, Manpower Minister Muhaimin Iskandar, Energy and Mineral Resources Minister Jero Wacik, Agriculture Minister Suswono, Maritime and Fishery Minister Sharif Cicip Sutardjo, Forestry Minister Zulkifli Hasan, Industry Minister M.S. Hidayat, and Public Housing Minister Djan Faridz.


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