JAKARTA, Nov 2 — Indonesia will address constraints on economic growth including problems with infrastructure, logistics, electricity and labour, in order to attract investment and create jobs, Trade Minister Mari Pangestu said today.
Pangestu, a respected technocrat and reformer in the cabinet, said Indonesia could score some “quick wins” by developing its free trade zones in Bintan, Batam, and Karimun, near Singapore, and by setting up new, special economic zones in the next year.
Such zones would enable Indonesia to provide more efficient services in a few locations initially rather than across the country as a whole, and to use one-stop processing for exports and imports.
She also said that the government would continue with its reforms, for example of the civil service.
“The speed may not be as fast as we would like,” she said, but “this is irreversible and will get better and better.”
President Susilo Bambang Yudhoyono, who appointed his new cabinet last month after winning a second, five-year term in July, is targeting GDP growth of 7 per cent or more by 2014, up from a forecast of 4.3 per cent this year.
He is expected to unveil his 100-day economic plan soon, and is likely to announce measures to speed up infrastructure projects and push ahead with construction of power plants.
While Indonesia has pulled through the global economic crisis in relatively sound shape, thanks partly to the fact it is less dependent on exports than others in the region, it still falls short of its potential.
Investors frequently cite corruption, legal uncertainty, red tape, poor infrastructure, and tough labour laws as deterrents, and say these hold back growth in Southeast Asia’s biggest economy.
Pangestu said that addressing logistics, such as roads and transport, would help to attract manufacturers, for example in the electronics and automotive sectors, as well as in the textiles and garments industries.
“We’ve seen new investments and existing companies expanding, using Indonesia as a regional production base,” she said.
“We will see a greater trend in that direction.”
In May, Volkswagen, Europe’s largest car-maker, announced an agreement to assemble Tourans compact minivans in Indonesia.
Pangestu said that the government would be focused on infrastructure investment, and in particular, making sure that electricity supplies improved, by ensuring that a crash programme to bring 10,000 megawatts (MW) on stream in the next two years was implemented and another 10,000 MW thereafter.
Frequent blackouts disrupt manufacturing and have been a major source of complaint among some of the Japanese firms with production facilities in Indonesia.
Other major concerns with investors — the country’s onerous labour laws and the “spectre of exorbitant costs” in cases where companies have to retrench — are also going to be addressed, Pangestu said, while still protecting workers’ rights. — Reuters
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