Positive outlook for a diversified economy
MEASURED GROWTH ARE THE WATCHWORDS THAT ACCOMPANY INDONESIA'S NEW FOUND CONFIDENCE IN ITS ECONOMY. FOREIGN INVESTORS ARE BACKING THE POTENTIAL SHOWN IN RESURGENT INDUSTRIES, AND MODERNIZATION IS SET TO CONTINUE

PLANTATION agriculture is being regenerated and output is expected increase 55 percent next year.

Indonesia’s economy is back on track following the financial problems suffered by the South-East Asian economies in 1997-98, and more measured growth is now seen as preferable to the fast pace enjoyed by the region until the late 1990s.
Today the more cautious view of the country’s prospects has led to modernization and diversification of the economy into more traditional sectors, such as agriculture and industry, rather than focusing on oil and gas.
Indonesia’s President, Megawati Sukarnoputri, has established her authority among all political parties in the interests of national stability. Good relations with main trading partners US, Japan, Singapore, Thailand and Malaysia have also contributed to the recovery.

Finance Minister Boediono predicts that Indonesia’s gross domestic product (GDP) will rise to five percent in 2003, exceeding a projected growth of over four percent this year. Mr. Boediono says the projected increase in the second half of this year will improve on the 2.15 percent recorded in the first.
This forecast is supported by the Bank of Indonesia's Deputy Governor, Miranda Goeltom. She cites higher exports and a lower rate of inflation as the contributing factors to growth.

GDP is forecast to reach five percent in 2003, exceeding this year’s figure of four percent

The Deputy Governor says that the stronger exchange rate between the rupiah and the US dollar has helped curb inflation. She explains that the Central Bank will continue its prudent monetary policy and possibly lower the interest rate, in a bid to stimulate further economic growth, but not at the risk of an inflation increase.
Demand is returning to Indonesia’s industrial base, particularly heavy industries such as steel, shipbuilding and chemicals, which are seen not only as a means to greater national self-sufficiency but also as a source of non-oil exports. Industry has been developed to the point where it accounts for about 40 percent of GDP and provides jobs for 15 percent of Indonesia’s young and fast-growing labor force.
To broaden industrial development, Rini Soewandi, the Minister for Trade and Industry, is promoting a plan to revitalize selected areas of manufacturing. The program is due to start in 2003.
Several branches of industry are targeted, including textiles, electronics, footwear and wood processing, including pulp and paper.

The improving business environment has spurred a growth in small and medium-sized enterprise (SME). In 2001 the number of SME industries reached 2.88 million, up 5.9 percent from 2.72 million in 2000. This increase in SME units has encouraged a larger intake of labor, up 6.12 percent in 2001. Recovery of the banking sector has also played its part, allowing enterprise easier access to working capital loans.
Not without irony, it was the oldest and most traditional sector of the economy, agriculture, that largely kick-started the economic rebound from recession in 1999.
Indonesia is the world's largest producer of coconuts, the second largest of palm oil, copra and natural rubber and the third largest of rice, coffee and cocoa.

The government estimates that due to improvements in economic conditions and a conducive business climate, the agricultural sector will achieve growth of 2.7 percent in 2003. Meanwhile, plans to develop the plantation industries are under way and the Ministry of Agriculture predicts a rise of 55 percent in output as compared with 2002.
Indonesia's vast mineral wealth will also play a major part in the diversification of the economy. While the country is the world's second largest tin producer, the full potential of this and other mineral resources, including copper, bauxite and nickel, has by no means been exploited to the full.

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