Indonesia must reform to hit 8% GDP growth, business chief says
Published Wed, Oct 9, 2024 · 04:53 PM

INDONESIA will need to reform its state-owned enterprises and build up investment if it wants to hit incoming President Prabowo Subianto’s target of 8 per cent annual gross domestic product growth, said the leader of an influential business association.

Prabowo’s growth target is “achievable,” said Arsjad Rasjid, chairman of the Indonesian Chamber of Commerce and Industry, pointing to other five times Indonesia had done so in the past. But policy reform is a must to take Indonesia to that point in the coming years, he said.

“The question is, how much can the government budget fuel growth?” Rasjid told Bloomberg during an interview on the sidelines of the Association of South-east Asian Nations summit in Laos. “Let’s say 3 to 4 per cent. We want to go 8 per cent. We need the private sector.”

“Of course in Indonesia we have state-owned companies, but I think there is a need to reform the state-owned enterprises to be more competitive, to be more efficient,” he said.

South-east Asia’s largest economy is heading for a leadership change with Prabowo set to be sworn in on Oct 20. He succeeds President Joko Widodo, who was at the helm for a decade marked by steady 5 per cent economic growth, a surge in foreign investment and Indonesia’s rise as a key player in the supply chain for batteries and electric vehicles.

Prabowo aims to take economic growth even higher to 8 per cent during his five-year term. He’s pledged to continue Jokowi’s push to refine more of Indonesian commodities onshore, as well as accelerate the nation’s green energy transition.

That could have an impact on Indika Energy, which Rasjid heads. The energy company has sought to diversify its coal business by going into EVs, logistics and gold mining in a gradual shift away from fossil fuels. Indika’s net income fell 77 per cent in the first half of 2024 amid lower gains from its associated entities and joint ventures.

Rasjid said he will step down as chairman of Kadin, as the Indonesian Chamber of Commerce and Industry is called, amid a leadership tussle with Anindya Bakrie, president-director of Bakrie & Brothers. Despite initially being sworn in for a five-year term, from 2021 to 2026, Rasjid said he would be stepping aside from the role following an election to decide his replacement. He had been a major backer of rival presidential candidate Ganjar Pranowo ahead of the vote earlier this year.

“Whoever wants to be the chair, go ahead, no problem,” he said, adding that he hoped to have the process completed by the end of the year. BLOOMBERG