TEMPO.CO, Jakarta - The Financial Services Authority's (OJK) board of commissioners' chairman Muliaman Hadad looks to the future with a positive mind, believing Indonesia will welcome 2017 strongly. He has confidence that Indonesia's economic growth will exceed the government's 5.2 percent target next year, provided the country can optimize domestic potentials and provide policies to ease investments.
In an interview with Tempo reporter Reza Maulana two weeks ago, he said Indonesia can count on its economy amid the lingering global slowdown. Excerpts:
What will Indonesia's economy be next year?
2017 will be a difficult year still, as there is no significant sign of global economic recovery. Our challenges next year will be focused on how to optimize domestic economic potentials, especially those related to the financial sector. The main thing is to empower our financial institutions so they can boost domestic economic activities.
Whose economies are we better compared to?
We're in a better position compared to Brazil, Turkey, Argentina and others. We still have a shot in becoming an investment destination among emerging markets. That's why I believe we can expect higher economic growth in 2017 than in 2016. The government is projecting 5.2 percent, but I believe it will be more than that.
What growth rate can we achieve?
It's a bit difficult to name a figure, but it can be higher than 5.2 percent, provided we empower domestic potentials optimally and continue with reform efforts to simplify investments.
When asked whether Joko Widodo's is heading towards that direction, the financial regulator chief lauded Widodo's administration's initiatives to spur domestic potentials by deregulating less effective provincial rules and simplifying licensing process. This policy, he said, needs to continue in 2017.
So we are relying on the domestic sector?
That's our strength. Thirteen economic policy packages have been released; all with investment climate improvement as substances. The tax amnesty is not standing on its own; it is part of the government's way of responding to the global economic slowdown. SO, we are on the right track.
He also said that financial inclusive is a must, as world leaders said the global weakening has been going on for too long; profiting the one percent and widening the welfare gap.
How do we push for financial inclusion?
The main problem has been difficult access to financial services, especially for small and micro businesses. If we provide them with access, they can help empower the domestic economy. There are more than 50 million SMEs in Indonesia, ran by some 90 percent of Indonesian business players. If we can solve some of their problems, they will give our economy a new energy boost.
How can we effectively manage the funds from the tax amnesty proceeds?
One important thing in tax amnesty is to monitor capital inflows—especially from repatriation. The law says the funds must stay in Indonesia for at least three years. In addition to the monitoring aspect, another challenge is how to allocate the funds for productive projects. We will do that in 2016 and 2017, making sure that funds entering Indonesia through gateway banks can be supervised. The fund owners don’t want their money invested in bonds and securities only, but also in the real sector. The OJK will listen to all inputs on how to achieve simpler, more effective mechanisms to repatriate more funds. Our latest data shows that that fund has reached Rp163 trillion.
Read the full interview in this week's edition of Tempo English Magazine