[JAKARTA] Indonesia President Joko Widodo is confident he can reach his economic growth target of 7 per cent by 2019 through increased infrastructure spending and lower borrowing costs.
The country is relying on investors and state-owned companies to fund 70 per cent of its infrastructure needs, and wants a third of that from the China-led Asian Infrastructure Investment Bank, the president, known as Jokowi, said in a Bloomberg Television interview. The government is aiming for 5.3 per cent economic growth this year, well short of the goal set by Jokowi upon taking office in 2014.
"I still have four years to achieve that," said Jokowi on Thursday after inspecting a toll road project on the island of Sumatra. "If infrastructure is going on, and industry, and manufacturing, and tourism is promoted well, then it will begin showing by the fourth and fifth year."
Jokowi has pledged to implement business-friendly reforms, increase spending on railwaysand ports, and to transform the country's often corrupt and inefficient bureaucracy. He initially struggled to enact his agenda amid distracting political squabbles and policy confusion, but the 54-year-old reshuffled his cabinet in August and the new team set to work addressing investor complaints through a series of economic policies.
The government will change the rules governing foreign investment limits in 49 sectors including in retail, fisheries and the digital economy, Jokowi said. On Thursday, the government announced it will allow greater foreign ownership in industries from toll roads to cinemas, and restrict it in 19 others including coral reef harvesting and small plantations.
To support the economy, the government wants interest rates to fall toward the inflation rate, Jokowi said, stressing that Bank Indonesia was constitutionally independent. The central bank cut its policy rate by 25 basis points in January to 7.25 per cent, which compares to an inflation rate of 4.1 per cent for last month.
"The government can't interfere," said Jokowi, following comments by the Vice President Jusuf Kalla calling for rate cuts last year. "But we want the BI rate to fall, fall, fall, fall, and keep falling so the real sector can compete with other countries."
Driven by an increase in government spending, the economy grew 5.04 per cent in the final three months of 2015, surpassing all estimates in a Bloomberg News survey. The economy expanded 4.79 per cent in 2015, the slowest rate since 2009.
Jokowi's lofty infrastructure goals include more than 3,000 kilometers of railways lines, 24 ports and 2,000 kilometers of roads by 2019. He has attended ground breaking ceremonies for at least two high-profile projects only for work on them to stall.
"Progress has been slower than we would have liked but the intent is clear," said Moazzam Malik, British ambassador to Indonesia, at the launch of a business survey last week that showed confidence in the country declining. "Jokowi had a dose of reality over the last 16 months.