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THE World Bank’s Board of Executive Directors approved funding of US$800 million or around IDR11.6 trillion to support investment and trade policy reforms and help accelerate Indonesia’s economic recovery and transformation.
According to the Director of the World Bank for Indonesia and Timor-Leste, Satu Kahkonen in a statement in Jakarta, Wednesday (6/16), said this assistance will support the plans of the Government of Indonesia which is carrying out reforms to attract investment and improve economic competitiveness.
“These reforms have the potential to support the transformation of the economy to shift from a commodity sector to a sector with higher added value. This will provide a much-needed impetus for post-pandemic economic recovery,” Kahkonen said.
Kahkonen also explained that the financing for development policy operation (DPO) support is structured to increase investment by opening up more sectors for private investment. The focus of this support is specifically on foreign direct investment, adding highly skilled professionals in the labor market, and encouraging private investment in renewable energy.
This financing is also structured to support trade policy reforms aimed at promoting competitiveness and economic recovery as well as increasing access and affordability of prices for basic food commodities and raw materials as well as facilitating access to manufacturing inputs.
“The increase in investment that is expected to be triggered by these reforms will also require careful environmental management. The World Bank will work closely with other development partners to support the government in strengthening environmental management efforts in all sectors,” Kahkonen noted.
Overall, the DPO aims to support major reforms in Indonesia’s trade and investment fields, in line with the longstanding cooperative relationship between the World Bank Group (WBG) and the Government of Indonesia.
This activity is fully aligned with the country partnership framework (CPF), recently adopted by the WBG, which identifies strengthening economic competitiveness and resilience as an important way to reduce poverty and improve welfare.
Currently, major barriers to investment and trade have limited Indonesia’s ability to attract export-oriented foreign direct investment, reduced Indonesia’s integration into global value chains, and increased domestic food prices.
These challenges have also slowed growth in the manufacturing and non-commodities sectors, so that most of the jobs created in recent decades have been in the low-productivity commodity and service sectors, which generally earn below middle-class wages.
Meanwhile, due to the pandemic, Indonesia experienced its first recession in two decades. This condition exacerbates the challenges facing the economy to expand into more sophisticated sectors in order to create jobs with better wages and higher productivity. [antaranews]
