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Seven percent growth viable over long term, say experts
While the new administrationâs target of posting 7 percent growth by 2019 is deemed feasible, experts warn it must be cautious and treat the process more as a long-distance run than a sprint
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hile the new administration's target of posting 7 percent growth by 2019 is deemed feasible, experts warn it must be cautious and treat the process more as a long-distance run than a sprint.
According to IMF senior resident representative for Indonesia Benedict Bingham, there has been a shift in Indonesia's stance on economic growth since the new administration took office.
'The focus was previously on growth supported by commodities. Now, there's renewed focus on competitiveness. That's why you see this agenda, a big focus on infrastructure and on creating fiscal space for infrastructure,' Bingham said on Wednesday during The Economist's 'Indonesia Summit 2015: New Light of False Dawn?'
The shift was also reflected in the government's efforts to reform the business climate and attract higher foreign investment to boost the economy.
'Hopefully, there will also be a new trade policy, which will be less focused on protecting the domestic market. Indonesia has to look outward, to where it can compete in global markets. That can help with the 7 percent economic growth target,' he said.
As reported, President Joko 'Jokowi' Widodo has set a 7 percent economic growth target for the next five years until his term ends in 2019.
However, many are skeptical about the target, saying it is overly ambitious amid a global economic slowdown. The latest growth data from the Central Statistics Agency (BPS) seems to support such skepticism, as growth fell to 5.02 percent in 2014 from 5.78 percent the previous year.
Bingham argued that the government's main challenge would be laying the foundation for what he called 'a long-distance run'.
'This is not a 100-meter sprint. It is a long-distance run. The government should start building up confidence in this new growth model, so investors will start to invest,' he said.
The IMF expects to see the engines of both the public and private sectors crank up by the end of this year, going into 2016, and see the country begin to create more competitive tradable sectors to generate exports beyond 2017.
Indocement president director and CEO Christian Kartawijaya said in the same forum that the current transition period would hopefully bring positive results for business players in the long-term.
He applauded the government's move to put all licensing matters under one roof at the Investment Coordinating Board (BPKM), but added that some issues remained unresolved.
'The policy is there, but it's still confusing in the field regarding the authority in charge of issuing licenses,' he said, adding that the company ' one of the country's major cement producers ' also expected the government to play a role in solving the land-acquisition matter.
'These issues are in Indonesia's [in-tray]. We usually have good ideas, but face difficulties executing them,' Christian said.
Meanwhile, Bank Mandiri president director Budi Gunadi Sadikin spoke of the need for large capital in the banking industry to support Indonesia's large-scale economic projects.
