(Archived Content)
JS-2122
Over the past two days, I have met with economic and financial officials in the new Indonesian government as well as members of the business and international communities.The meetings were very useful andIwas impressed with the energy and focus of President Yudhoyono’s team. I also participated in the Manila Framework Group meeting inYogyakartaand thank our gracious Indonesian hosts for chairing a very successful meeting.
With a strong mandate of over 60% of the popular vote, President Yudhoyono has an opportunity to press through his reform agenda. His team has already made it very clear: corruption will not be tolerated and the government must move forward with reforms to improve the investment climate.We are confident that this government canfollow through with these pledges.
Macroeconomic stability has improved over the past few years,although somerisks remain. Continued constraint of fiscal spending will both be crucial in maintaining macroeconomic stability, reducing the debt burden and increasing the confidence of the market. On monetary policy, Bank Indonesiaiscontinuing to establish ainflation-targeting regimeand full transparency will be key to its success.
Theprincipalchallenge facing Indonesia is to bring investment and growth back to pre-crisis levels. For this, increasing the confidence of investors, both domestic and foreign, is crucial. It is a concern that investors are deterred by high-profile and unfavorable court decisions, corruption, conflicting regulations, and tax administration issues, to name a few.
The government’s efforts to review conflicting regulations between the center and local governments and reduce bureaucratic obstacles are welcome first stepsin addressing this important issue.We look forward to the government continuing todedicate its full energy to all aspects of improving the investment climateso that it willsucceed.
There have clearly been improvements in governance in the banking and corporate sectors since the 1997 crisis.We were pleased to here thatthe government and BankIndonesiawillcontinue improving bank supervision, strengthening anti-money laundering and counter-terrorist finance laws.It will be important as well for there to be continued progress in privatizing the state banks.
This is a moment of opportunity for Indonesia - Ibelievethat the new government will take advantage of itand we will work closely with them as they carry out these crucial tasks.