Presentation on theme: "1 Indonesia: Macroeconomic Update and Progress on Structural Reforms October 25, 2007 1."— Presentation transcript:
1 Indonesia: Macroeconomic Update and Progress on Structural Reforms October 25, 2007 1
Outline Recent Economic Development Progress on Structural Reform Efforts to Accelerate Infrastructure Development 2
3 Indonesia’s economic recovery continues and persistent 3 Persistent Improvement over Time: GDP Growth 1998-2007 Percentp.aPercentp.a -13.8% GDP has grown by 6% over last 4 quarters, While non oil GDP has reached 7% in Q2-07
4 Supported by recoveries in private consumption and strong external demand 4
5 Private Investment show a significant improvement 5
8 Structural Reform Inpres 6/2007 consists of policy actions for ▫ Improving investment climate ▫ Accelerating infrastructure providing in Indonesia through improving policy environment which include de-monopolize SOEs, providing legal basis and incentive for PPP. ▫ Encouraging SME development and ▫ Reforming financial sector and SOEs Partial and Gradual Administration Reform. Revitalization Agriculture Sector Energy Sector Reform Poverty Reduction National Program (Including rural infrastructure program) ▫ PNPM : coverage and size of allocation per sub district expanded significantly. All sub district will be covered and allocation per district is risen up Rp 3 billion ▫ Conditional Cash Transfer : Pilot Project in 6 Provinces in 2007 and 2008 8
9 Structural Reform: Inpres No 6/2007; Some Highlights ▫ Investment Climate : Implementation Regulations of Investment Law PP No : to provide clarity of authority and responsibility between central and local government and better mechanism for evaluation local regulations Efforts to reduce days of setting up business near complete PEPI is operational Major improvement in VAT refund mechanism Modernization in Custom and Tax Administration ▫ Infrastructure Reform ▫ Financial Sector Reform Financial Sector Stability Forum is operational BEJ and BES merger Draft of Fiscal Incentives for Public Companies is completed ▫ SME Sector Reform Framework for SME Credit Guarantee System is completed Business Plan for two SOEs : Askrindo and PT SPU completed and capital injected for those SOEs are approved by the Parliament ▫ Bureaucratic and Institutional Reform (Ministry of Finance and some regional governments) 9
10 Progress on Investment Climate 10 Monitoring surveys show a real improvement in investment climates and partly reflected in current investment recovery.
11 Efforts to accelerate infrastructure development Multiple tracks strategy ▫ Increase budget allocation for infrastructure including matching grant for region to encourage higher allocation for infrastructure from local government budget ▫ PPP through partial guarantee: toll road ▫ Crash program for electricity sector ▫ Institutional Reform to allow private sector participation. Partly implemented this year but majority in 2008 11
12 Model Projects: 0f 10 model projects, 4 projects are under way ▫ Tangerang Water Project: tender was completed and now on the bidder evaluation stage. ▫ Toll Solo Kertosono: Tender was completed but no interest; new scheme is prepared. ▫ Central Java Power Plant: tender preparation with IFC assistance. ▫ Telecom : Palapa Ring : the bid winner awarded through private consortium scheme.