ECONOMIC growth in Indonesia is expected to hold steady at just over six percent in 2009, Indonesian President Susilo Bambang Yudhoyono said in his official address on the occasion of his country’s national day. Giving an upbeat assessment, Yudhoyono said the gross domestic product is forecast to expand by 6.2 percent next year, compared with projections of 6 percent to 6.4 percent for 2008.
“Inflation is seen dipping to roughly 6.5 percent next year,” said the president, adding that consumer prices rose nearly 12 percent in July from a year ago, after the government increased fuel prices by around 30 percent — a move aimed at cutting fuel subsidies that has threatened budget stability. Yudhoyono, in his speech, gave an overview of the economy with special reference to energy situation, life of the people and foreign policies.
The Indonesian government set next year’s budget against expectations that crude oil will average $100 a barrel. Volatile oil prices and the US credit crisis have raised the threat of global recession. Yudhoyono outlined overall economic improvements since the Asian financial crisis a decade ago bankrupted the Indonesian banking system and sent tens of millions into poverty.
“The country now holds its highest financial reserves in history, at more than $100 billion, and has balanced its budget deficit, which is expected to fall to 1.9 percent in 2009,” said the president. He said the country’s economy is on track to grow at the pre-crisis level of a decade ago. Poverty has also declined to its lowest level in 10 years. It was the Indonesian president’s fourth state-of-the-nation address as he enters the final year of his term in office.
In his 90-minute address, televised live nationwide from Parliament yesterday, the Indonesian leader spent almost an hour detailing his government’s achievements in the past year. One of the most significant was the reduction of poverty to 15.4 percent — the lowest since the Asian financial crisis in 1998. The president attributed this to his administration’s efforts in tripling the budget for poverty alleviation programs.
“This shows that our policy is in favor, in concrete terms, of the less-well-to-do community,” he noted. “We took action and will continue to take action to alleviate poverty in our homeland.”
He said that the unemployment rate has also declined to 8.5 percent. And despite the global fuel and food crisis, Indonesia’s economy remained strong with billions of dollars in its foreign reserves — the highest in the country’s history.
“In the near future, our economic growth rate shall replicate the achievement we have had during the 30 years prior to the crisis,” said the Indonesian president. He stressed that his administration will continue to pursue a pro-growth, pro-employment and poverty abatement policy in its final year in office. On the foreign policy front, Indonesia has forged closer relations on every front with its traditional friendly states.
It has had very cordial relation with Saudi Arabia. Jakarta’s stance on most of the regional and international issues is identical with the Kingdom, which has been close ally of Indonesia.
In a related development, Saudi Arabia and Indonesia are planning to pursue major joint venture projects in the field of agriculture. Indonesia and the Saudi Binladin Group have discussed an ambitious plan to spend at least $4 billion in developing at least 500,000 hectares of Indonesian land for rice production. Indonesia’s special envoy to the Middle East, Alwi Shihab said recently that the Binladin Group has been tasked by the Saudi government to look into investing in agricultural projects following sharp increases in food prices.
In a report, Abu Bakar Al-Hamid, a board member and executive managing director with the Binladin Group, said the company would conduct a feasibility study of the proposed land area, in the Merauke district of Indonesia’s Papua province, before making their final decision. Shihab said the company plans to grow basmati rice, a strain of rice that’s not widely consumed by Indonesians, and that the rice will be mostly exported back to Saudi Arabia.
He said the close working relationship between Saudi Arabia and Indonesia, as well as Indonesia’s good agricultural prospects, made the company place the country high on its list of places to invest.
Merauke is located in remote Papua, one of the poorest provinces of Indonesia, which is beset by a lack of infrastructure such as roads, irrigation systems and electricity. Indonesia is hoping to transform Merauke into a commodities producing hub known as the Merauke Integrated Food and Energy Estate (Mifee), and it has been wooing both domestic and foreign investors to invest in the planned production center.