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Indonesian Government, Private Sector Must Work Together
December 11, 2009

With the Association of Southeast Asian Nations to see a Free Trade Agreement with China begin to come into force next year, Indonesian companies will have to be more nimble. (Photo: Reuters) With the Association of Southeast Asian Nations to see a Free Trade Agreement with China begin to come into force next year, Indonesian companies will have to be more nimble. (Photo: Reuters)
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As 2009 comes to a close, Indonesia’s financial sector has much to be proud of. While financial institutions in most developed countries experienced difficulties, Indonesian banks — apart from a number of badly managed ones — have done fairly well.

The same can be said for the business sector, which has performed relatively well on the back of a robust economy. Growth this year may have been lower than in 2008, but unlike many other economies, corporate Indonesia still posted healthy profits.

However, companies cannot afford to be complacent. Companies must continue to grow in 2010, and to achieve this they must strive to be more efficient and innovative. Besides improving their competitiveness, companies will need to take greater calculated risks and put in place sustainable growth strategies.

They will face greater competition from regional companies, especially those from Asia’s rising giant, China. With the Association of Southeast Asian Nations to see a Free Trade Agreement with China begin to come into force next year, companies in Asean member state Indonesia will have no option other than to be more nimble.

The private sector can serve as the locomotive for economic growth but it will need help from the government. In this regard, it is heartening to hear Finance Minister Sri Mulyani Indrawati say the government will pursue greater public-private sector partnerships. She has promised to spend every cent that the government collects from taxes on stimulating the economy, either by way of infrastructure or fiscal incentives.

In such a challenging environment, the minister and the government will have to work doubly hard to maintain the economic momentum not just in 2010 but over the longer term. The government can start by treating the private sector as a real partner in fostering faster economic growth.

It can do this by listening to and working with the private sector to develop more business-friendly policies. It can do so by lowering taxes and being less bureaucratic. It can do so by pushing ahead with reforms that make doing business less onerous. It can do so by providing the necessary infrastructure to support strong business activities.

The minister also promised to pay special attention to the economy. She rightly pointed out that maintaining the growth momentum is critical, and said that the government will ensure that the voice of business is considered in policy deliberations.

The right policy environment is critical for businesses to invest and expand. While fighting corruption is important, incorrect policies do far more damage to business and investor confidence. A private-public sector partnership that is properly structured will go a long way toward ensuring that Indonesia’s economic momentum is maintained for many years to come.