The economic packages which are aimed at removing barriers to trade and investment was a good and necessary move.
Sri Mulyani
Arief Kamaludin | Katadata

World Bank Managing Director Sri Mulyani has applauded the policies introduced by President Joko “Jokowi” Widodo’s government aimed at resolving issues hampering trade activities. These policies could improve Indonesia’s competitiveness in international trade.

She commended the policy to accelerate infrastructure development. Infrastructure would ease the transportation and the distribution of goods, and facilitate production processes. The government is currently speeding up the development of a number of infrastructure projects, including toll roads, railroads, airports, ports and dams.

Sri also praised the government’s economic policies. Since last September, the government has launched 12 economic policy packages. Sri said these packages are aimed at removing barriers to trade and investment.

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“This was a good and necessary move,” said Sri, former finance minister during President Susilo Bambang Yudhoyono’s administration, when acting as a keynote speaker at a sustainable development seminar at the University of Indonesia (UI) in Depok, West Java, Tuesday (26/7).

(Read: Only One Economic Policy Package Left to Launch)

She said in the past 50 years, Indonesia had always used trade and global investment to build the economy and reduce poverty. ASEAN’s integration of a free trade market, which came into effect this year, would certainly be an opportunity to enhance trade relations among member states.

Through this market integration, the value of trade among ASEAN member states could increase from US$600 billion to US$1.9 trillion. The problem, however, lies in the fact that Indonesia must overcome a number of obstacles in order to improve trade.

One of these obstacles is the productivity of Indonesia’s human resources. Sri said that while wages are low, production costs per unit are high. “If we (Indonesia) can integrate with the global market, improving productivity is imperative,” she said.

Meanwhile, the cost of domestic trade is also relatively high. Sri said that trade costs in Indonesia are some 130 percent higher than in Malaysia and some 90-100 percent higher than in Vietnam and Thailand.

She added that Global Alert, a platform that discusses global problems, has reported that Indonesia is one of the countries that most frequently imposes trade barriers. “The only people who benefit are money lenders,” she said.

(Read: Brexit Causes IMF to Slash Global Project Growth)

The World Bank is now concerned about slow global economic growth. The global economic growth projection has been lowered numerous times. She said the sluggish growth of China’s economy and the structural changes to that nation’s economy had had a global impact.

Sri talked about her recent visit to Argentina, where she met with President Mauricio Macri and several Argentinean governors. After her visit, she concluded that the country’s economy is encountering difficulties due to weak exports to China.

Latin America and Southeast Asia have been experiencing the same problems. “China receives 11 percent of Indonesia’s exports,” said Sri. (Read: Global Finance Institutions Slash Economic Growth Projections)

Sri added that low commodity prices, recent acts of terror and global climate change have all had an impact on the economy of developing countries.

Countries need to coordinate to build trust and eliminate trade and investment barriers. Only then will productivity improve and the economy recover.

However, the world is currently experiencing the opposite. She said populism is rising and expanding, reflected by relationships between nations, which have hit rock bottom. For example, the UK’s decision to exit the European Union (Brexit).

“How should Indonesia respond? Indonesia has great potential to become a respected global player,” she said. If the Indonesian people can take advantage of technology, this country should be able to face current global economic challenges, which Sri dubbed a “perfect storm”.

Desy Setyowati