Govt finally sees light at end of the economic tunnel

Urip Hudiono, The Jakarta Post, Jakarta

Out of the tunnel and into the light, the government appears confident that 2007 will see higher growth resulting from the revival of real sector and the maintenance of the country's hard-earned macroeconomic stability.

A new policy package to promote the development of small and medium enterprises (SMEs), Coordinating Minister for the Economy Boediono said Tuesday, would be among the efforts to drum up growth in the real sector -- which has been lagging behind recent macroeconomic improvements.

In addition, he said, the passing into law of the much-needed tax, investment and labor law amendment bills would also help accelerate growth.

"There are several risks to watch out for this year, but in general, we expect 2007 to be better in terms of both economic growth and stability," Boediono said during a discussion with the media.

"There may be disruptions caused by natural disasters and problems in the global economy, but I think our economy is stronger and more stable now, and will be able to cope. Stability, in particular, is important to businesses so that they can more accurately calculate future plans."

The government is expecting growth in 2007 to reach 6.3 percent, with on-year inflation of 6.5 percent. Inflation wrapped up last year at 6.6 percent, lower than the government's 8 percent estimate, while 2006 growth is expected to "match, or be slightly better than 2005", Boediono said.

Indonesia's economy has hit some turbulence over the past two years, with growth in 2005 slipping to 5.6 percent following that year's fuel price hikes, which caused resurgent inflation and curbed spending. Growth remained sluggish in the first part of last year before bouncing back to 5.5 percent by the third quarter on easing inflation and interest rates, and accelerated government spending.

To further stimulate growth, the government plans to focus on developing the economic potential of the country's SMEs, and is currently drafting a package of policies to achieve this goal.

The new policies will be aimed at addressing the problems that SMEs have long been facing as regards financing and market access, business licenses and human resources, Boediono said without elaborating.

"SMEs have consistently proven their resilience in contributing to growth and providing jobs. Furthermore, they are important incubators of entrepreneurship in this era of globalization," he said.

The SME sector is made up of some 40 million businesses, or 90 percent of the country's total enterprises, employs about 37 million people, or 37 percent of the workforce, and accounts for some 52 percent of GDP.

Boediono also said that the government hoped the House of Representatives would wrap up the deliberation of a number of bills that are considered crucial for encouraging more business and investment in the country.

"We hope that the new investment law will be passed in this year's first quarter," Boediono said. "Most of the substantive problems concerning the other bills have also been resolved."
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