From Government of Indonesia

Indonesia on Road to Recovery WB

Indonesia is well on the road to economic recovery from the turmoil of the 1997 Asian financial crisis, outgoing World Bank (WB) country director Andrew Steer said Thursday (22/2/07).

The challenges and radical changes Indonesia has faced since the 1997 crisis and the fall of President Suharto the following year were on a scale similar to those faced after the collapse of the former Soviet Union, he said. But compared to Russia, "Indonesia has done much, much better," Steer was quoted as saying by Agence France-Presse.

The government has reduced public debt from nearly 100% of gross domestic product in 1999 to 38% at present, which he described as "an amazing achievement".

Interest payments have tumbled from almost 26% of total expenditure in 2001 to just above 10% this year while education spending has increased substantially. "Our view is that things are on the rebound," Steer said.

He said figures showed that industrial production is rapidly recovering and surging imports of capital goods also heralded a recovery in investment.

With its finances in a much healthier state, Steer said the government is in a position to invest in infrastructure, which he said is the biggest constraint to investment.

The country also has a plethora of new institutions to promote democracy, openness, transparency and accountability, although they are still far from efficient.

Decentralization appears to be working, with the majority of respondents to a World Bank survey saying the quality of services has improved sharply over the past two years, he said.

He said the government needs to review some of its labor regulations to prevent investors in labor-intensive businesses from moving elsewhere.

Vice President Jusuf Kalla unmasked an ambitious plan to reduce the number of state-owned companies from 139 to 69 by 2009 through mergers, privatization or liquidation.

Kalla said that number could be further cut to 25 by 2015, Antara News agency quoted him as saying on Monday.

"Many state firms are very good in terms of performance and financial capacity, and only a few are not good and must be improved," Kalla said after a meeting at the Office of the State Minister for State Enterprises which examined the performance of SOEs.

The government issued a permit to state logistics agency Bulog to import 500,000 tons of rice, and set an April 30 deadline for the delivery of the staple, the trade ministry said on Monday.

The permit is part of the previously announced intention to import up to 1 million tons of rice this year, in addition to an earlier announced 500,000 tons, in an effort to stabilize prices.

Rocketing rice prices have caused tension among poor consumers, for whom it represents the major expenditure, amid reports that stocks from Bulog and its local agencies were being bought by traders.

Cement sales rose 18.6% in January from a year ago as the sector showed signs of recovery on the back of stronger activity in the construction sector, data from the Indonesian Cement Association showed on Tuesday, Reuters reported.

Cement sales were hurt by the economic growth slowdown in early 2006, but a strong recovery in the fourth quarter put the industry's overall annual growth at 1.8% last year.

In another sign of improving consumer confidence, sales of motorcycles rose to 342,773 in January from 266,618 a year earlier, a report by the Indonesian Motorcycle Industry Association (AISI) showed. The figure was lower than the 442,961 sold in December.

President Susilo Bambang Yudhoyono meanwhile promised to further streamline processes for business licenses further, The Jakarta Post reported.

"Business licensing is still a complicated issue. Previously, it took 151 days, but then we cut it to 97 days. Now, it needs to be reduced to a maximum of 50 days in all local government areas, he told the opening of the Young Indonesian Business Association (HIPMI) conference in Semarang on Tuesday.

The president also urged regional administrations to refrain from issuing regulations that could stymie investment. "The government has so far annulled 750 ordinances as they conflicted with central government policies," Yudhoyono said.
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