Jakarta, Aug 26 (Antara) - The next government will face various issues
in improving people's welfare and in developing the country's economy
amid low economic growth and high rates of poverty and unemployment.
"The next government under President-elect Joko Widodo, better known as
Jokowi, must take bold steps such as conducting a budget 'revolution',
removing economic distortions, and raising economic growth," Thomas Ola
Langoday, dean of the Economic Faculty of the Widya Mandira Catholic
University (Unwira), East Nusa Tenggara, said on Monday.
He noted that the next government should focus on increasing economic
growth to about seven percent in order to prevent the emergence of time
bomb threat.
If economic growth remains at only about five percent, as at present,
the new government will encounter a vicious circle, which will be
difficult to overcome, Thomas Ola Langoday warned.
"It should focus on maintaining annual economic growth at over seven percent," he added.
The government had recently unveiled its budget plan for 2015, in which
economic growth was set at 5.6 percent. According to Finance Minister
Chatib Basri, the economic growth assumptions established in the Draft
2015 Budget by 5.6 percent has been optimistic and in accordance with
the development of the global economic trend next year.
"Economic growth of 5.6 percent has been set based on predicted improvement of the situation globally," he noted.
According to the Bank Indonesia (BI/central bank), the impact of
external factors remains determinant on Indonesian economic development
in 2015.
Governor of BI Agus Martowardojo said one of the external factors was
normalization of the policy of the US Central Bank.
He explained that the improvement of global economic condition is
attributable mainly to advanced countries with their accommodating
monetary policy and relaxation of fiscal pressure.
Agus noted that for this year Indonesia's inflation has remained under control within the target of the central bank.
The
trend of inflation is even declining recorded at 6.7 percent
year-on-year (yoy) in the second quarter down from 7.32 percent yoy in
the previous quarter.
In July 2014, the country's inflation was only 0.93 percent month-to-month or 4.53 percent yoy.
The current account deficit had also declined to US$9.1 billion in the
second quarter or 4.27 percent of the gross domestic product (GDP) from
US$10.1 billion a year earlier or 4.47 percent of the GDP.
For 2015, however, the potential risk is still existent. The government
should be aware, particularly associated with increased geopolitical
risks that could raise oil prices, of the economic slowdown in China as
well as of the normalization of the policy of the United States Central
Bank (The Fed).
Under these conditions, the government has set macro assumptions, such
as inflation of 4.4 percent, SPN state treasury bill rate of 6.2
percent, rupiah value of 11,900 per dollar, price of oil ICP $105 per
barrel, oil lifting about 845,000 barrels per day, and gas lifting
1,248,000 barrels per day.
According to Thomas Ola Langoday, with a 5.6 percent economic growth,
while other macroeconomic variables, such as inflation, are also at
about five percent, Indonesian people could only benefit from one
percent of the GDP.
Langoday said, under that condition, absorption of workers could not be
increased, and the poverty rate will remain the same as its current
level of 28 percent of the population.
Further, if distortions take place in other macroeconomic variables,
such as weakening of the rupiah against foreign currencies or against
the US dollar, it will increase the poverty rate.
Moreover, if the poverty indicator, namely US$1.25 worth of daily
expenditure, changes to US$2, it could be assured that the number of
people living under the poverty line will increase.
"This
will have a consequence, and the new government will encounter a new
problem. The number of poor people and unemployed persons will increase
due to scarcity of job opportunities," he said.
Fuel subsidy problem, which continues to burden the state budget, also
exists. If the subsidy is reduced or even abolished 100 percent, it will
affect the people. "This will lead the new government to encounter the
problem of vicious circle, which will be difficult to overcome,"
Langoday explained.
So, he suggested that the new government should take bold steps,
including budget "revolution" at the beginning of its administration.
The
entry of the budget "revolution" is rescheduling the drafting time of
the revised state budget (APBNP) from the usual October in the current
year to March beginning in 2015.
If the new government has no guts to reschedule the drafting time of
the APBNP, the people will face different economic problems, which will
serve as a time bomb, Langoday emphasized.
In the meantime, President-elect Jokowi has set a seven percent
economic growth target for 2014-2019, according to Akbar Faizal of the
Jokowi-Jusuf Kalla pair's transitional office.
"To achieve the target, an infrastructure investment worth at least
Rp6,500 trillion is required," Faizal, the transitional office's deputy
in charge of infrastructure, public housing, and transportation, said.
He explained that 25 percent, or Rp1,638 trillion, of the money
required for infrastructure investment will be funded by the State
Budget (APBN). The remaining 75 percent must be collected from other
parties, such as state-owned enterprises and private companies.
Indonesia's economic growth over the last five years has been five
percent annually, with the budget allocation for infrastructure
development hovering at four to five percent of the GDP, Faizal
added.***2***
(T.A014/INE/B003)
EDITED BY INE
(T.A014/A/BESSR/Bustanuddin) 26-08-2014 |
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