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Indonesia’s best bet for growth is services: Government

Bappenas head Bambang Brodjonegoro expects the service sector to become the growth engine by 2045.

Norman Harsono (The Jakarta Post)
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Jakarta
Tue, August 27, 2019

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Indonesia’s best bet for growth is services: Government A barista participates in a Creative Economy Agency (Bekraf) certification event in West Jakarta on Aug. 7. The service sector contributed 54 percent to the economy last year, absorbed 55.1 percent of the workforce in 2017 and growing an average of 7.1 percent annually between 2010 and 2017. (JP/Donny Fernando)

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n overlooked reason as to why the country’s economic growth has hovered at about 5 percent since 2013 may be because calculations have never thoroughly taken into account all service sector activity.

Such a thought-provoking but simple notion has been in the back of the mind of the government for a couple of years and efforts are being made to better capture the local service sector, which has high export potential amid the sluggish global economic growth that has dampened demand for Indonesian products.

The Office of the Coordinating Economic Minister and Jakarta-based think-tank Indonesia Services Dialogue (ISD) have been quietly pushing 27 ministries and state institutions to more exhaustively capture service sector data, including on service exports, which is necessary to ease current account deficit pressure as well as formulate more accurate policies and trade deals.

“I’m certain that if we [properly] calculate services exports, economic growth would be above 5 percent,” said Edi Prio Pambudi, the undersecretary for monetary affairs and balance of payments at the Office of the Economic Minister, in an interview.

The economy grew at the lowest level in two years at 5.05 percent in the second quarter, with exports becoming the prime element that dragged down growth and caused a widening current account deficit that is an important state financial health indicator for investors in determining whether to pour funds into a country.

It was such a widening current account deficit that prompted the ministry to set the ball rolling on a plan to have thorough services statistics, having sent late last year a letter to the 27 ministries and institutions, asking them to provide more detailed services data.

To date, only one has fulfilled the request, which is the Youth and Sports Ministry. This lack of enthusiasm over services within government institutions shows that the country thinks little of its service sector compared to raw materials and manufacturing, Edi said.

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