ECONOMIC GROWTH TO RELY ON INVESTMENT

By Andi Abdussalam

Jakarta, May 25 (ANTARA) - Beginning next year, Indonesia's economic growth is expected to rely on and shift to investment instead of public consumption and other sectors such as government expenditure.          "Right now, public consumption is still dominant, but in 2013, investment will have a bigger contribution than other sectors. Hence, investment will be the dominant sector," declared Chief Economic Minister Hatta Rajasa.          The government's expectation about this shifting of the economic growth driver from public consumption to investment was echoed by Finance Minister Agus Martowardojo.          The investment sector will serve as the source of economic growth in 2013. "When it occurs in 2013, it will be the first time that the source of economic growth will come from investment, whose contribution will exceed that of public consumption," asserted the finance minister.          The finance minister's confidence that the investment sector will become the main driver of the nation's economic growth by next year is based on the fact that investment in the country has continued to increase every year.          "The investment in the country has been systematically increasing from 2008-2009 until now," Agus remarked. However, he was unable to predict the percentage of economic growth that will be contributed by investment. "It should be seen first before it is made public, but (we hope) that the investment will grow by over 10 percent," the finance minister explained.          Domestic and foreign investments in Indonesia in the first quarter of 2012 totalled Rp71.2 trillion, according to Gita Wirjawan, the chief of the Capital Investment Coordinating Board (BKPM).          He said that the figure showed an increase of 32.8 percent, compared with an increase of Rp53.6 trillion for the same period in the previous year.          "The increase in investment was generated by the increasingly equitable distribution of investment throughout the country. The growth of investment is in line with the various policies issued by the government," Gita added.          According to BKPM, the amount of foreign and domestic investments in 2011 reached Rp251.3 trillion - an increase of 20.5 percent from the corresponding figure of Rp208.5 trillion in 2010. This year's investment is expected to increase by about 10 percent.          Consequently, Finance Minister Agus Martowardojo has opined that the investment sector will become the main driver of economic growth in 2013. The government is convinced that investment will provide a greater contribution to the nation's economy in 2013 than any other sector such as government expenditure or public consumption.          In the meantime, Bank Indonesia (BI) has also predicted that the increased investment and domestic demand boosted by strong consumption will be the drivers of the country's economic growth this year.          In its report on economic prospects for 2012, BI expects to see greater consumption in the household and government sectors, while investments will continue to increase because of the favourable economic climate.          In this respect, according to BI, Indonesia's economy will grow by 6.3-6.7 percent, despite the current global economic slowdown. In fact, Vice President Boediono expects even higher economic growth.          Boediono expressed his hope that the country's economic growth will reach at least 7-8 percent in order to absorb the existing manpower in the country. "The figure of 6.5 percent economic growth is not sufficient. We want it to reach 7-8 percent in order to reduce unemployment," the vice president pointed out.          With regard to public consumption, which is one of the factors that will boost the nation's economic growth, the central bank has projected that household consumption will increase by 4.7-5.1 percent, as the real income of the people is expected to rise, along with the pay raise for civil servants and higher wages for workers.          Meanwhile, government consumption is estimated to grow by 5.7-6.1 percent. BI reported that fiscal deficit in 2012 will be kept in check to maintain the country's economic stability.          According to BI, investment will grow by 9.6-10.1 percent as the mid-term economic prospects are strong and the domestic market remains attractive for investment. The increase in capital spending and foreign direct investment is also expected to have an impact on infrastructural growth, which is still lagging behind.          The investment climate had also improved, owing to infrastructure development and regulations that have helped promote investment growth amid the current global economic uncertainties.          Moreover, investment in infrastructure development is expected to increase imports of heavy transportation equipment. Imports of goods and services may still reach 11.6-12.0 percent, thanks to the increasing - though limited - domestic demand and consumption.          Economic analyst Tony Prasetiantono stated that at present, the allocation for infrastructure development is less than 3 percent of the Gross Domestic Product (GDP).          He said that the government can further increase its infrastructure expenditure through the development budget in order to boost economic growth.          "At present, Indonesia's GDP is about Rp7,400 trillion, while the allocation for infrastructure is only about Rp100 trillion. The ideal budget for infrastructure expenditure is about Rp370 trillion, or about 5 percent of the GDP," Tony noted.***2*** (T.A014/INE/F001) 25-05-2012 13:56: