Shamim Adam – Indonesia will announce initiatives to spur investment, improve infrastructure and enhance social safety nets within the first 100 days of the next administration taking office, Vice President designate Boediono said.
The changes will help the government achieve its target of economic growth reaching an average 7 percent in the next five years, Boediono said in Singapore today, without giving details of the plan. Growth this year will be about 4 percent, before accelerating to over 5 percent in 2010, he added.
Indonesia skirted the recession that befell its Asian neighbors and its policy makers are joining others in the region in saying their economies are past the worst of the global slowdown. President Susilo Bambang Yudhoyono's government is striving for equitable growth to reduce terrorism, which most recently hit the country this month with attacks on two luxury hotels in Jakarta.
"We have gone through the worst of the crisis and now we're seeing some light at the end of the tunnel," Boediono said. We plan to "announce another package that will improve the climate for investment. We're expecting private investment will recover once political certainties are in place."
Last year, foreign investment in Indonesia rose at the fastest pace in the region to $8.3 billion, almost double the amount attracted in the entire decade before Yudhoyono took over. Yudhoyono won a second five-year term in elections this month, garnering 61 percent of votes, and his administration will begin Oct. 20.
Terror attacks
Bombings at the JW Marriott and the Ritz Carlton hotels in Jakarta on July 17 killed nine and wounded more than 50 people. The terrorist attacks have not deterred investment in the country, with the Jakarta Composite Index climbing 6.2 percent since the blasts.
"Given its overall political stability, even taking into account the recent bombings, the country is bound to attract foreign investment, both in the form of foreign direct investment and portfolio flows," said Fauzi Ichsan, senior economist at Standard Chartered Plc in Jakarta.
Robust domestic consumption, which accounts for more than 60 percent of Indonesia's gross domestic product, "saved" the economy and reduced the impact of slowing exports on growth, Boediono said. The central bank in July reduced its key interest rate for an eighth straight month, bringing the cumulative easing to 275 basis points since December.
"The main purpose of our collection of policies or actions is to ensure that confidence in Indonesia remains intact," Boediono said.
Reduce joblessness
Inflation will probably be around the "region's norm" of between 3 percent and 4 percent by 2014, the former central bank governor said. The rupiah is stable now, and the market should determine the currency's level, he said today in an interview with Bloomberg Television.
Economic growth will help reduce unemployment in Southeast Asia's most-populous nation from 8.1 percent this year to a targeted 5 percent to 6 percent by 2014, Boediono said.
About 32 million Indonesians live on less than 70 cents a day, according to the government. Subsidies for food and energy for the poor are necessary and not a "waste of money," Boediono said today.
The government will strengthen social safety nets to reduce poverty and ensure that such policies are sustainable, Boediono said. Cash transfers are an emergency measure and cannot be continued for the long term, he said.