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Govt needs to stay cautious next year on challenges

While the economy is predicted to experience better growth next year, the government needs to stay cautious on account of possible challenges stemming from moderate industry growth and “brain drain” owing to regional economic integration, analyst and business player have said

Khoirul Amin (The Jakarta Post)
Jakarta
Fri, November 27, 2015

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Govt needs to stay cautious next year on challenges

W

hile the economy is predicted to experience better growth next year, the government needs to stay cautious on account of possible challenges stemming from moderate industry growth and '€œbrain drain'€ owing to regional economic integration, analyst and business player have said.

Institute for Development of Economics and Finance (Indef) executive director Enny Sri Hartati said economic growth would hit 5 percent next year, below the government'€™s estimate of 5.3 percent.

'€œIf industry growth is lower than the country'€™s economic growth, we predict [economic] growth will not sustain ['€¦],'€ she said on Thursday.

Growth in the non-oil and gas industry hit 5.2 percent in the third quarter of this year, according to Industry Ministry data. However, around 79,000 workers have been laid off as of the first nine months of this year.

Enny also attributed the relatively low-growth estimate to the government'€™s lower-than-expected performance that had not fully boosted domestic consumption and industrial sectors until the last quarter of this year.

Disbursement of microloans (KUR) hit only Rp 5 trillion (US$365 million) as of end-October, a far cry from Rp 39 trillion in the full-year period in 2014, according to Indef'€™s data.

Economic growth hit a six-year low of 4.7 percent as of the third quarter of this year. The government previously stated that this year'€™s growth would be around 5 percent, below the target of 5.7 percent stipulated in the revised 2015 state budget.

External factors such as the uncertainty of the US Federal Reserve rate hike and slowing Chinese economy would still likely affect Indonesia'€™s economy next year, Enny stated.

IPMI International Business School executive director and CEO Jimmy Gani said, meanwhile, that he was optimistic the country would perform better next year thanks to a series of stimulus packages issued since September.

He said, however, that he was worried about the possible massive outflow of the country'€™s brightest skilled-workers into more developed Southeast Asian countries such as Brunei Darussalam, Malaysia and Singapore amid the implementation of the ASEAN Economic Community (AEC).

'€œThe AEC will provide greater opportunities and more flexible mobility [for skilled workers] to find the highest salary they can get,'€ said Jimmy, who is also a commissioner at Sari Pan Pacific hotel.

The AEC, to be implemented by end of this year, will facilitate the freer movement of goods, services and people among the 10 ASEAN member countries '€” Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, the Philippines and Vietnam.

Indonesia ranked 42nd out of 61 countries in the IMD World Competitiveness Ranking 2015, lagging behind Singapore in third, Malaysia 14th, Thailand 29th and the Philippines 41st.

Senior Bank Indonesia deputy governor Mirza Adityaswarma said he was upbeat that the country would see better growth next year as China'€™s economy would likely improve in the second half of next year and there would be certainty on the Fed rate.

Voicing a similar view, the Industry Ministry'€™s research and development department head, Haris Munandar, said that the industry would grow faster next year as the government'€™s policy packages would likely start producing their intended effects.

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