Indonesia policy reform

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The World Bank praised Indonesia’s recent reforms, including higher public infrastructure spending and deregulation measures to lessen strict trade and investment policies, for maintaining the country’s resilience and allowing the government to diversify economically.

Since September 2015, the government’s has announced numerous policy reforms. Some sectors — in particular, trade and investment policy — witnessing a shift towards deregulation and have helped to maintain investor confidence in the country, hence Indonesia’s resilience against limited investment due to slowing global demand and volatility in the global financial market.

Moving to Manufacturing

Rodrigo Chaves, the World Bank’s Country Director for Indonesia, said global economic headwinds, including the consistently low commodity prices and the sluggish global trade, have forced Indonesia — a commodity exporter country — to expand into sectors other than mining and commodity, such as the manufacturing and service sectors.

Indonesia’s manufacturing operations are dominated by assembling and blending, which makes the country vulnerable to changes in multinational corporations’ global strategies. The country’s global share of manufacturing has remained at around 0.6 percent over the last 15 years.

“This is the right time to improve Indonesia’s manufacturing sector,” said Ndiame Diop, the World Bank’s Lead Economist for Indonesia. “Now is a critical moment for Indonesia to implement further reforms that will enhance the competitiveness of its manufacturing and services sectors, especially tourism.”

The World Bank kept its March prediction that the Indonesian economy will grow 5.1 percent this year.

Earlier this month, the Bank downgraded its global growth forecast to 2.4 percent from the previous 2.9 percent. Private consumption and public capital spending are projected to support Indonesia’s growth this year.

“Indonesia’s policy reform is the foundation of our economic resilience. I can’t stress this enough,” said Trade Minister Thomas Lembong.

A version of this appeared in Jakarta Globe on June 20. Read the full article here.

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