Investment to turn
the wheels of industry
ONGOING ECONOMIC REFORMS, RISING GDP, FALLING INFLATION, AND FIRM MOVES TOWARDS REAL DEMOCRACY ARE SET TO PERSUADE FOREIGN INVESTORS THAT NOW IS THE TIME TO ENTER THE INDONESIAN MARKET.
RESOURCE RICH Indonesia has the potential to use its energy as the bedrock for internal economic development and regional integration.
When THE Peoples Consultative Assembly recently voted in favor of direct elections for the state presidency and an end to designated parliamentary seats for the military, Indonesia took another big step towards real democracy. The decision will back President Megawati Sukarnoputris mandate and pave the way for bolder governments.
departure symbolizes an important break from the past. Indonesia has come a
long way since the autocratic Suharto was driven from power four years ago,
yet many foreign investors are waiting to see what else will happen before engaging
themselves fully with South East Asias most populous nation.
President Megawati daughter of independent Indonesias founding father, Sukarno has been taking a measured approach to political and economic reform, as she believes that attempting too much, too fast, could derail the entire process.
Despite occasional tension on some of Indonesias 17,000 islands, President Megawati has managed to keep unrest under control. She has won plaudits abroad not only for acquiescing to East Timors UN-monitored independence process earlier this year, but also for visiting the former Portuguese colony, which Suharto annexed in 1975.
Economic indicators give credibility to the argument that Indonesia is on the way up
West wants this nation of 220 million people to achieve its potential. The archipelago
has huge strategic importance, is rich in resources and could become a major
player on the global stage. Much depends on the success of the economic reforms
currently underway, which aim to remove the legacy of corruption.
Several economic indicators give credibility to the argument that Indonesia is on the way up. It has taken the country far longer than neighbors such as Malaysia and Thailand, to recover from the 1997 Asian financial crisis. But recently the rupiah the national currency has rallied strongly. In July, the inflation rate fell to 10 percent, almost reaching the state target of nine percent.
Simultaneously, the London-based Fitch rating agency upgraded Indonesias long-term foreign and local currency ratings from B- to B.
The stock market has risen by around 14 percent this year and the International Monetary Fund, which has been working closely with President Megawatis government, says it is happy with the way the macroeconomy is shaping up.
PRIORITY PROGRAM aims to boost local trade by creating a conducive business climate and raising the populationís awareness of domestic products.
all major oil producers, Indonesia is susceptible to shifts in the world price
of crude. But given the countrys oil reserves, and its development of
other fuels such as gas and coal, it has the potential to use its energy as
the bedrock for economic development and growing regional integration with the
other member states of the Association of South East Asian Nations (Asean).
Until now, the country hasnt fully utilized its influential place in Asean, but all this is set to change.
Development of the Trans Asean Gas Pipeline, which will transport Indonesian fuel, will provide new opportunities. The government has agreed to sell Singapore 2.27 trillion cubic feet of natural gas as part of a 20-year deal worth $9 billion, and with the rising demand for energy in the region, Indonesia can look forward to a growing market.
Ministry Secretary Ansari Bukhari points out that the countrys largest
export market is the Asia Pacific Region. Indonesias non-oil exports
to countries in Asia and the Pacific in 1996-2000 reached an average of 68 percent
of total non-oil exports.
In the Asean region alone, which has a population of 500 million, Indonesias market prospects in the trade sector in the last five years have been relatively high, he says. The countrys balance of trade has always been in
its favor by an average of 13.35 percent.
Mr. Bukhari suggests Indonesia should make the most of its membership of the Asia Pacific Free Trade Cooperation (APEC) forum by trading closely with other members and luring prospective investors to Indonesia.
Only a sound economic footing will guarantee sustainable growth and sufficient jobs
relations with the EU, Australia, Japan and the U.S. also mean that major foreign
capitals are rooting for Indonesias success.
Though aid and trade will undoubtedly have a role to play in Indonesias short-term development, the government realizes that only by putting the domestic economy on a sound footing will it be able to guarantee sustainable growth and sufficient jobs for the millions of people entering the labor market every year.
Gone are the old days when Suhartos golden boy and brief successor Habibi, aimed at making Indonesia a giant theme park of high technology and grandiose projects. Todays priorities are much closer to reality, and include maximizing the countrys rich agricultural potential.
means not only feeding the people, but also building up export markets for products
such as rice, coffee, cocoa, coconuts, copra and palm oil. Mineral resources,
including tin, copper, bauxite, nickel, and perhaps gold, also offer interesting
possibilities for future exploitation.
A new development plan for 2003 aims to speed up the rate of growth. Minister for Trade and Industry Rini Soewandi says: The priority program aims to boost domestic trade by creating a conducive business climate, raising public awareness of domestic products and by developing a national distribution system in a united national market.
The government is confident that Indonesia will register four percent GDP growth this year, and slightly more in 2003. While that may not be grounds for celebrating in the streets, it could be enough to persuade potential foreign investors that this is the time to take the plunge.
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