HIGH COST ECONOMY IN INDONESIA

The Indonesian government intends to "debureaucratize" itself in order to eliminate the high-cost economy in the country, a senior economic minister said here on Thursday. "Incentives for the business world need not always mean giving them fiscal facilities. They can also come in the form of a debureacratization process to overcome the high-cost economy," Antara news agency quoted Coordinating Minister for Economic Affairs Aburizal Bakrie as saying.

However, the government's intention to eliminate the high-cost economy could not be achieved in a short time. "This goal cannot be achieved in one or two weeks' time because it will be a matter of decades. But we are serious in our intention as the high-cost economy will only lead to incompetence. All business circles want the bureaucracy to work faster and more efficiently than it is doing today," he said. Indonesia has the largest economy in Southeast Asia and is one of the emerging market economies of the world. The country is also a member of G-20 major economies and classified as a newly industrialized country.

It has a market economy in which the government plays a significant role through ownership of state-owned enterprises (the central government owns more than 160 enterprises) and the administration of prices of a range of basic goods including fuel, rice, and electricity. In the aftermath of the financial and economic crisisthat began in mid-1997 the government took custody of a significant portion of private sector assets through acquisition of nonperforming bank loans and corporate assets through the debt restructuring process. Since 2004 the economy has recovered and growth has accelerated to over 6% in recent years.

Indonesia regained its investment grade rating from Fitch Rating in late 2011, and from Moody's Rating in early 2012, after losing its investment grade rating in December 1997 at the onset of the Asian financial crisis which Indonesia spent more than Rp450 trillion ($50 billion) to bail out lenders from banks. Fitch raised Indonesia's long-term and local currency debt rating to BBB- from BB+ with both ratings is stable. Fitch also predicted that economy will grow at least 6.0% on average per year through 2013, despite a less conducive global economic climate. Moody’s raised Indonesia's foreign and local currency bond ratings to Baa3 from Ba1 with a stable outlook

The high-cost economy is generated by the illegal economic practices play an important role in helping accelerate inflationary pressures, as well as a barrier to the fundamental factors such as the exchange rate of the rupiah and the stock of goods and money. the high-cost economy has big advantages compared to other costs that actually occurred in this trend is the high barriers to entry of the industry where cost issues are prominent and in the creation of large economies of scale In relation to the size of the modern market of clean water, energy, telecommunications and electricity is very expensive to build transmission networks (water, gas pipeline, electricity and telephone lines).