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Although many economists are worried that the global economic
slowdown will cast a shadow over the country's economy next year,
Coordinating Minister for the Economy Boediono says he is confident the
economy will actually accelerate.
"I've always been optimistic about Indonesia's economy. I believe that
economic growth will be higher than this year," Boediono told reporters
Saturday.
He said that the government's target of achieving economic growth of
6.8 percent next year was still feasible, even though many economists
estimate that the global economic slowdown will drag down the pace of
growth.
The government's growth target is higher than the 6.4 percent predicted
by the World Bank, which says that the global economic slowdown
resulting from high oil prices and the United States' subprime mortgage
crisis will also affect Indonesia.
The country recorded 6.2 percent growth in the first nine months of
2007. The central bank has predicted 6.4 percent growth for the fourth
quarter of this year, which will bring full-year growth to 6.2 percent,
slightly below the government's target of 6.3 percent.
However, a number of senior economists, such as Faisal Basri and
Mohamad Ikhsan Mojo, have forecast a gloomier outlook for the country's
economy.
Faisal, for example, said that the increases in fuel prices would
further raise production costs for the industrial sector, which has
been held back by high economic costs resulting from inefficiency and
red tape.
He said that given these circumstances, it would be impossible for the
country to achieve the sort of economic growth targeted by the
government.
Boediono said that with higher economic growth, the number of people
living in poverty would be reduced."We're expecting the number to fall
by about 15 percent next year," he said.
The World Bank has said that Indonesia has an opportunity in 2008 to
reduce the number of people living on under US$2 per day by 4.6
million, from 105.3 million to 100.7 million, out of a total population
of 236.4 million.
Boediono said that if the government could stabilize rice prices, it
would be able to reduce the poverty rate by more than 15 percent as
poor people spend about 30 percent of their incomes on rice.
Meanwhile, an expert advisor to the minister, Jannes Hutagalung, said
the government was currently promoting a number of schemes to improve
the investment climate, including the introduction of "one-roof"
licensing procedures.
According to the International Finance Corporation (IFC), Indonesia
ranks 123rd out of 178 countries in the ease-of-doing-business ratings.
"If we could simplify the process for obtaining business licenses,
Indonesia's ranking would climb to around the 70 mark," Jannes said.
The government will need to act fast if it wishes Indonesia to continue
to be able to compete with its neighbors, such as Thailand and
Malaysia, he added.
In September, the University of Indonesia's Economic and Social
Research Institute reported that investors needed up to 86 days before
they could commence their businesses in Indonesia.
Economist Didik Rachbini told the discussion that the lack of
coordination between government institutions made the business climate
uncertain.
"It's hard to find a government institution that engages with a
specific sector. There's always a tangle between ministries," he said.
Didik added that the government should focus on improving
infrastructure, the financial sector, investment climate and SME sector.
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