INDONESIA’S TPR: STEADY GROWTH NOT HIGH ENOUGH TO REDUCE POVERTY, UNEMPLOYMENT
Steady economic growth since 2003 has not been enough to reduce Indonesia’s poverty or unemployment rates, according to the WTO Secretariat.
The trade policy review noted that 5.2 percent annual GDP growth had not made a dent on poverty or the country’s 10 percent unemployment rate. Despite efforts to improve infrastructure and the overall investment climate, the report warned that delayed implementation of key structural measures including tax and labour law approvals could undermine investor confidence, and keep growth at levels inadequate to address unemployment.
The report pointed to agriculture’s primary role in poverty alleviation, since it occupies 44 percent of the total workforce. Jakarta has been aiming to preserve food security though self-sufficiency in food staples, particularly rice. Central to this policy is a market intervention to maintain a ceiling price for rice consumers and a floor price for producers. However, the WTO Secretariat noted that a ban on rice imports had contributed to a 30 percent increase in price, and was linked to increased poverty. It reported that the government relaxed the ban to help stabilise domestic rice prices.
Most of Indonesia’s merchandise trade was with East Asia, Singapore being the largest ASEAN trading partner and China increasing its share of both exports and imports. Merchandise exports accounted for 30 percent of GDP whereas imports had increased from 18 to 23 percent since 2003.
Indonesia appeared to be following a three-track strategy to international trade negotiations, the review found - multilaterally at the WTO, regionally through ASEAN, and now bilaterally, with Japan.
During the meeting, Members reportedly commended Indonesia’s leadership role as coordinator of the G-33, and also its role as an active member of the Cairns Group and the G-20.
Notably, the report found that a series of export prohibitions and licensing requirements had done little to prevent forest over-exploitation and illegal logging (thought to account for 50 percent of timber production). Foreign demand for cheap timber appeared to be overwhelming Indonesia’s enforcement capacity, it said.
Members reportedly called for greater services reform, pointing to remaining foreign investment restrictions. They also expressed concern about inadequate infrastructure, particularly in transport, as well as arbitrary customs valuation procedures, lack of transparency on the part of customs authorities, discriminatory sanitary and phyto-sanitary (SPS) measures, and restrictive import licensing in the textile sector.
ICTSD reporting; "Steady Economic Progress with Investor Confidence Key to Future Prospects," WTO PRESS RELEASE, 27 and 29 June 2007.