World Bank: Indonesia Needs More Investment to Ensure Growth
20 March 2015 18:00 WIB
TEMPO.CO, Jakarta - A new report published by the World Bank concluded that Indonesia will not be able to accelerate the growth of its' economy before 2016, unless its' on-going reforms are accompanied by additional measures that could guarantee and secure the rate of incoming investments into the domestic market.
According to the World Bank's latest report published in the March 2015 edition of Indonesia Economic Quarterly, titled 'High Expectations', Indonesia's economic will be hit by an economic slowdown in China, which has sent global commodity prices tumbling down. As a result, Indonesia’s economic growth declined to around the 5 percent mark in 2014.
The report suggested that a doubling of government spending in infrastructure can help lift demand and accelerate fixed investment spending. Currently, Indonesia's year-on-year spending on infrastructure stands at 4.3 percent - but the World Bank advises that even more is needed, and that above all else, effective and transparent implementation is needed.
"The Government of Indonesia deserves praise for the fuel subsidy reforms and subsequent budget reallocations to infrastructure spending. But lower oil prices and weak tax compliance have eroded the savings from subsidy reform, requiring sustained public policy action at this time of high expectations. In the long term, Indonesia would benefit from improving revenue collection, including from the non-oil sector," says World Bank Country Director for Indonesia, Rodrigo Chaves.
The World Bank also stated in its' report that further improvements of the investment climate and Indonesia's competitiveness boost market sentiment - as at present, Indonesia's economic growth is hampered by relatively tight credit availability, as well as higher import costs, among others.
"Accelerating fixed investment spending will strengthen Indonesia's economy, and private sector involvement in this endeavor is key. The establishment of the 'One Stop Shop' for business licensing at the Investment Coordinating Board (BKPM) is a step in the right direction. But full implementation will not be require some time," says World Bank Lead Economist for Indonesia, Ndiame Diop. (*)
