Lab-Indonesia

Indons eye 7.7% growth by 2014

Friday, 20 August 2010 14:42 |

Written by Sabrina |

Indon President vows to boost development, tackle graft

Starbiz | Foreign News | 17 August 2010

JAKARTA: Indonesia’s President Susilo Bambang Yudhoyono plans to amend laws to improve infrastructure development to stimulate economic growth that he hopes will reach a target of as much as 7.7% by 2014.

South-East Asia’s largest economy is expected to expand over 6% this year, and the solid growth combined with increased stability is attracting strong foreign capital inflows to its bonds and stock market as investors hope for further reform.

Susilo was re-elected in 2009 to a second five-year term on promises to boost economic growth by tackling graft, reform of the civil service, and infrastructure, but many Indonesians are disappointed with his slow progress and his failure to defend his top reformers from attacks by vested interests.

President Susilo Bambang Yudhoyono delivers his State of the Nation address before the parliament in Jakarta ahead of Independence Day celebrations. – AFP

“The time has come for us to no longer be a caged tiger but a nation that is competitive on the international stage,” Yudhoyono said in an annual state of the nation speech yesterday.

“In 2014, the government is targeting economic growth of 7% to 7.7%. Through good planning and correct implementation, we are optimistic we can reach that target,” he told parliament ahead of Independence Day today.

Susilo said in the speech he would amend laws to improve infrastructure development, and reiterated he was committed to tackling graft, bureaucratic reform and good governance.

“We must encourage infrastructure development, which honestly is still lacking,” he said. “Our biggest challenge is how to mobilise sufficient investment.”

Anton Gunawan, economist at Bank Danamon in Jakarta, said progress on infrastructure had been slow, with a poor working relationship between central and regional governments and disruption from a parliament full of vested interests.

“That kind of growth by 2014 can be achieved as long as the progress within the next two years improves. There has to be a vast improvement in ... infrastructure, corruption eradication, improvement in logistics systems,” Anton said.

“Neighbouring countries are not so good, so Indonesia looks very attractive right now.

“This is the opportunity to be grabbed.”

Foreign direct investment is expected to pick up in 2010 after firms shunned the country for years in favour of China, India and Vietnam, citing red tape, graft and bad infrastructure.

Now steel giants Arcelor-Mittal and POSCO, and sovereign wealth fund China Investment Corp were eyeing new production plants and resources investments, government officials have said.

Investors have poured money into Indonesian markets in the past 18 months, with the stock index hitting a record hgh last month and the benchmark 10-year bond yield falling to a record low below 8% this month.

Investors hope further reforms will earn Indonesia an investment grade credit rating within two-three years, a status that would lead to a windfall for bondholders and put the country on a par with BRIC nations such as Brazil.

Susilo’s speech contained few details of specific reforms. Since its inauguration, his second-term government has passed only a handful of bills, none of which address the issues investors see as most urgent: Labour law reform, clean governance and bureaucratic reform. – Reuters

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