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Publication(Jakarta, 2014-05) World BankWithin the next two decades Indonesia aspires to generate prosperity, avoid a middle-income trap and leave no one behind as it tries to catch up with high-income economies. These are ambitious goals. Realizing them requires sustained high growth and job creation, as well as reduced inequality. Can Indonesia achieve them? This report argues that the country has the potential to rise and become more prosperous and equitable. But the risk of 'floating in the middle' is real. Which pathway the economy will take depends on: (i) the adoption of a growth strategy that unleashes the productivity potential of the economy; and (ii) consistent implementation of a few, long-standing, high-priority structural reforms to boost growth and share prosperity more widely. Indonesia is fortunate to have options in financing these reforms without threatening its long-term fiscal outlook. The difficulties lie in getting the reforms implemented in a complex institutional and decentralized framework. But Indonesia cannot afford hard to not try harder. The costs of complacency, and the rewards for action, are too high.
Publication(Washington, DC, 2003-12-04) World BankThe year 2004 will mark another crucial step in Indonesia's long-term transition. The country will go to the polls to elect new national and regional Parliaments, and for the first time in the history o f the Republic, to directly elect a President. This milestone in the country's democratization is accompanied by one in economic policy: for the first time since the onset o f the crisis, the Government will not have a program supported by the IMF. The Government's decision to graduate from its IMF program is warranted by the strong improvements in the country's macroeconomic conditions, and has been broadly welcomed by the markets and the international community. The Government's "Economic Policy Package Pre and Post IMF" or White Paper, issued as a presidential instruction on September 15th has helped build confidence in the Government's policies in the election year ahead. The policy package is intended to "bridge the credibility gap." The White Paper is a unique document: it is the first time that the Government commits itself transparently to a time-bound action plan to implement policies. The document shows continuity in macroeconomic policies and financial sector reforms, but also proposes a set of specific policy and institutional measures to address issues that have undermined the country's investment climate. While the timetable for adopting these measures is a short term one - fifteen months - many o f the proposed measures address fundamental longer term problems, and some will take several years to see through fully. The private sector, which has a high " stake in the measures included in the paper, has emerged as an independent monitor of progress. Since the White Paper is so central to Indonesia in the year ahead, much of this brief is devoted to discussing it. Beyond recent developments, the report discusses and analyzes critical policy actions from the White Paper. The report also points at the White Paper measures that may not necessarily be in line with the stated goals of the document. And finally, the report identifies policies that are needed beyond the White Paper to ensure Indonesia builds on the macroeconomic stability achieved to attain more rapid growth and poverty reduction.
Publication(Washington, DC, 2001-12-10) World BankIndonesia's recovery was already slowing several months before the events of September 11. Political instability had raised social tensions and slowed reforms--fueling capital flight, alarming investors, and delaying official external finance for development. Progress on bank restructuring had slowed and the debt of financially strapped corporations remained largely unresolved. Corruption flourished, unchecked by a justice system that itself was corroded. Regional tensions increased even as the country embarked upon an ambitious decentralization program. And, if real wages are any indication, progress on poverty reduction--encouraging in 1999 and 2000-ground to a halt. Although markets initially welcomed President Megawati Soekarnoputri into office, the new administration has made little progress on structural and governnance reforms in her first one hundred days in office, thus renewing nervousness in markets and worrying external donors and creditors. The events of September 11 have emphatically underscored the urgency of Indonesia's reform priorities. but donors need to be realistic about what is feasible, given strong vested interests, severe institutional weaknesses, the uncertainties arising from decentralization, and a turbulent transition to democracy. Progress is most needed in the key areas of structural reforms, good governance, and empowering and investing in the poor.