Wednesday, January 27, 2010

A Bright Economic Future for Indonesia

As world leaders and international businesspeople meet in Davos this week, they will do so in an environment of economic disquiet. A year after the biggest financial crisis to sweep the world since the Great Depression, the global economy is starting to grow again but there remains great anxiety.

First, there is fear that the massive fiscal stimulus unleashed in the United States and other major economies may have simply pushed economic recession into the future. Governments around the world must carefully balance between cutting spending too soon and allowing loose monetary policies to continue too long.

Against this backdrop unemployment remains unacceptably high in most developed countries, but particularly in the United States, where it stands at more than 10 percent. It is becoming increasingly clear that the comforting economic and political environment of the pre-crash world belongs to another era.

How does Indonesia position itself in this new world economic order? The country has been hailed as one of only a handful of economies that managed to post positive growth last year. Its banking system has remained relatively intact and is beginning to show signs of more lending.

And despite the recent political uproar over the controversial Bank Century bailout, Indonesia enjoys political stability and a government that has the trust of the majority of the people. Going forward, it will have to scale up its game if it wants to take maximum advantage of its current advantages.

Wednesday’s announcement of a new joint-venture infrastructure finance company, PT Indonesia Infrastructure Finance, which could potentially provide financing for a number of much-needed infrastructure projects with a total investment of up to Rp 30 trillion ($3.2 billion) for five years, is great news. It reflects strong investor interest in the country and, more important, will allow the economy to expand beyond the 5 percent targeted for this year.

That the joint venture is a partnership between the Indonesian government, the Asian Development Bank, the International Finance Corporation and private investors illustrates the success of public-private ventures.

The government is planning to upgrade its outdated infrastructure at an estimated cost of some Rp 2,000 trillion in the next five years. Hopefully, the IIF will prove to be a role model for other such ventures.

The joint venture is one of Finance Minister Sri Mulyani Indrawati’s projects under the government’s 100-day program, further proof that the administration remains on track with its development blueprint. This should be comforting news for the Indonesian people, who must remain confident for the future. These may be challenging times for governments and business leaders around the world, but Indonesia has shown that its economic house remains in good order. Jakarta Globe Editorial

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