Economists have called on the government to focus more on developing infrastructure and revitalizing the industrial sector in a bid to accommodate the fast-growing informal sector that has become the safety net of the unemployed.

“There has been economic growth, albeit minor, and there has also been deindustrialization, which is indicated by fast growth in the informal sector, while at the same time the formal sector contribution to our economy is decreasing," Sri Adiningsih, an economist at Yogyakarta's Gadjah Mada University, said Friday in response to President Susilo Bambang Yudhoyono's annual state of the nation address.

She pointed out to the formal sector's decreasing employment capacity, with many workers switching to jobs in the informal sector.

The number of small and micro industries in Indonesia in 2007 was 47.7 million, or about 95 percent of the country’s total businesses, Adiningsih went on. That figure jumped to about 50 million this year.

“We'll continue to see a growing trend in the informal sector, especially if the government doesn't take serious efforts to revitalize industries and improve infrastructure to drive investment inflow,” she said.

A recent World Bank report says Indonesia's economy has decelerated this year. Last December, the World Bank revised down its forecast for the country's growth from 3.8 percent in 2009 to 3.4 percent.

Bank Indonesia also revised down its economic growth forecast, from 5 percent to between 3 and 4 percent this year.

“The government can't drive growth without good infrastructure nationwide," Adiningsih said.

"Therefore it should develop more power plants, ports and roads to link cities and rural areas."

Citibank chief economist Anton Gunawan said the slew of natural disasters that hit the country in the past five years should also be taken into account.

“By considering the negative factors and the government's efforts to reach its economic targets, I think [Yudhoyono's] economic performance was not bad at all,” he said.

Indonesian Chamber of Commerce and Industry (Kadin) chairman M.S. Hidayat backed Yudhoyono's call for the country's economy to depend more on domestic market and less on foreign assistance.

“The government has to address three main issues: bureaucratic reform, employment and infrastructure," he said.

"That's the work left behind for the new government.”

Hidayat added the government had only actively pursued bureaucratic reform in the finance ministry in the past five years.

“The government should issue supporting regulations and review existing ones," he said.

"For instance, we don't have land acquisition regulations, so no wonder companies face difficulties when they need to buy land to build airports, ports, buildings or roads.”

Stock market analyst Felix Sindhunata suggested the government improve its policies and bureaucracy to ensure foreign funds stayed in the local market.

“Industry players need a firm government position on enforcing regulations, to maintain investors’ confidence in the market, especially foreign investors,” he said. (naf)

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