Dadan Wijaksana, Jakarta – A visiting team from the International Monetary Fund (IMF) has recognized early signs that the administration of President Susilo Bambang Yudhoyono is serious about improving the business climate here.
While it is still early, efforts to resolve high-profile legal battles with Mexican cement firm Cemex SA and US-based power firm Karaha Bodas Company (KBC) will strengthen the business climate, according to Daniel Citrin, IMF's deputy director for Asia and the Pacific.
"The fact that the government wants to try to resolve the problem and open dialog with the other sides, showing the willingness to normalize the situation, that's already a good sign," Citrin, who heads the visiting team, said on Monday.
Resolving these types of problems should help speed up the recovery of investor confidence in the country, Citrin added.
Negotiations between the government and Cemex and KBC are now underway to try to seek out-of-court settlements to put an end to protracted legal disputes.
The initiative to resolve the cases was taken by Susilo's economic team, which has pledged to improve the business climate and boost investment performance, which has been in the doldrums in recent years.
Citrin said the fund was encouraged by the government' focus on improving the investment climate and would support it in any way possible.
"The policy priorities of the new government – that is to continue the progress made in macro stability and to step up the drives to curb corruption and the high-cost economy, and efforts in legal reform – are very appropriate and correct," Citrin said.
"These are all something that we will fully support." Indonesia is in dire need of investment to generate higher economic growth. The economy is targeted to grow by 4.8 percent this year, but, as in previous years, that growth will be driven mainly by domestic consumption.
The visiting IMF team arrived here for a one-week visit to discuss economic policies with top government officials, legislators, business leaders and others.
The visit is part of twice-a-year regular dialogs between the IMF and Indonesia under a post-program monitoring system – a program applied to an IMF member nation after it completes its lending program.
Indonesia ended an IMF-sponsored economic reform program at the end of last year. The IMF provided billions of dollars to bail out the economy following the late 1990s financial crisis.
Citrin painted an upbeat outlook for the country's economy, which has progressed fairly well this year.
"Macro [economic] performance has been quite good, inflation is going down, GDP growth is picking up – strong enough to start bringing the employment rate down," he said. "So, the overall economic performance, I think, has been quite favorable," added Citrin.