Thursday, 10 July 2014


Several times before the World Bank had given their views, input and recommendation to the Indonesian Government various aspects of economy but so far the respond to it was unknown

The World Bank believed that the Indonesia Government must pursue growth at close to 9% and join the high-income club in 2030 to avoid the middle income trap in 2030. Such was written in the World Bank’s report entitled “Avoiding the trap.”

The world was waiting for Indonesia to emerge as the world’s economic leader. To meet the objective, Indonesia must step up competitiveness by playing catch up with regress and cover up the infra-structure gap and enhance market function.

The positive step would bring significant impact on the promotion of productivity ad income. Besides, the steps needed better management of Government expenditure and minimize efficiency, like oil subsidy. Such was statement of World Bank’s Country Director for Indonesia Rodrigo Chaves as quoted from World Bank’s internet site.

Furthermore with rising electronic-literate generation and rising labor cost in China, Indonesia gained stronger competitiveness in term of investment and stood a better chance to escape the middle income trap.

The world Bank’s rated although access to education in Indonesia had increased significantly, the great challenge was step up quality of education to make skillful and competent workforce.

Not less important was infra structure building. The World Bank’s rated that all the infra-structure development exercised by the Government and private sector in Indonesia constituted only% pg GDP or about half the need, which caused the nation to lose at least 1% of economic growth each year.

Reduction of oil subsidy would enable the government to allocate the available fund for infra structure building and other pressing need. Re allocation of  budget at provincial level would increase support to infra structure building.

With support of better provincial Governments, public service could be improved, such as health, sanitation, and wastage treatment. In line with development of infra structure and human resources and consistent regulations would enhance growth.

It would be necessary to ease permit facilitation in some sectors. However, at the same time the new regulation allowed more discretion  to ministries and institution. Internal experience showed that the policy most advantageous to the public was transparent policy with zero discretion.

With the above reformation, the World Bank was sure Indonesia could rise and avoid the Middle Income Trap [MIT]. The risk was loud an clear so the Government of RI must be ready to anticipate it.

Unless ready, Indonesia stood a chance to be trapped in MT the way it happened to Ghana who was buoyed by high economic growth and forgot to fill it with development especially infra-structure.

From the World Bank’s recommendation, the Government was called for to give serious attention to that matter. Surely not all of World Bank’s recommendation was  worth accepting, but at least they were considerable because their view was substantially valid. (SS)

Business News - July 2, 2014

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