Finance Minister Bambang promotes new growth model

Vincent Lingga, The Jakarta Post, Baku | Business | Tue, May 05 2015, 8:04 AM 

Finance Minister Bambang Brodjonegoro said on Sunday the 1998 Asian economic crisis and the 2008 global financial crisis had prompted Indonesia to adopt a new growth model that emphasized inclusive and sustainable development with less dependence on commodities and on the international market.

“In the 1990s, Indonesia and most other developing countries in Asia emphasized high growth led by exports too much, but the two crises have prompted us to design and pursue a new growth model focusing on inclusive and sustainable growth,” Bambang told a seminar on Asian growth potential on the sidelines of the Asian Development Bank (ADB) annual meeting in Baku, Azerbaijan.

He added that the 2008 global financial crisis also provided Indonesia with the highly valuable lesson that it was not economically sustainable to depend too heavily on commodities and the international market. “So in 2009 when most countries suffered economic contraction, Indonesia was still able to grow by 4.9 percent because we relied on domestic consumer spending as the main growth driver,” said Bambang, who spoke as one of eight panelists at the seminar.

He cited macroeconomic and financial-sector stability, reduced dependence on commodities, downstreaming (adding value) of natural resources and connectivity to global supply chains as several of the main prerequisites for inclusive and sustainable growth.

Another panelist, China’s Finance Minister Lou Jiwei concurred saying that China also had embarked on a new program to stimulate domestic consumption to spur growth.

“After the 2008 global financial crisis we have become more realistic and set our new normal growth level down to 7 percent from an average 10 percent previously,” Jiwei noted.

ADB president Takehiko Nakao cited the latest ADB Asian economic outlook report as charting a still positive picture of the Indonesian economy this year, saying the government’s policy reforms would have an impact on economic growth sooner than expected.

The ADB forecast the Indonesian economy would grow by 5.5 percent this year and 6 percent in 2016, far more optimistic than estimates from the World Bank and the International Monetary Fund (IMF), which predicted the economy would grow by 5.2 percent this year.

But the ADB projection is based on the assumption that the new government’s rapid reform momentum is maintained, especially the acceleration in infrastructure building and budget disbursement.

Swiss governor of the ADB Beatrice Maser Mallor also emphasized the importance of inclusive growth for sustainable development because only with jobs could people have purchasing power.

The ADB “Asian Development Outlook 2015” report forecasts that developing Asia will maintain its strong economic growth of 6.3 percent this year and in 2016 supported by soft commodity prices and recovery in the major industrial 
economies.

Two other panelists at the seminar, Indian Finance Minister Arun Jaitley and Azerbaijan’s Finance Minister Samir Sharifov, also shared the same view that falling commodity prices were creating space for policy makers across the region to cut costly fuel subsidies and initiate other structural reforms. 

The finance ministers regarded this opportunity as one to build frameworks that would support more inclusive and sustainable growth in the longer term, pointing out that with such diverse circumstances in the region, different keys are needed to unlock growth.