Agus D W Martowardojo, Governor, Bank Indonesia, on how to encourage development in middle- and low-income countries

Agus D W Martowardojo, Governor, Bank Indonesia

Infrastructure provision remains a big challenge, from project design and prioritisation through to financing and delivery. There is a need to boost investment in infrastructure to raise growth prospects, both in the shortterm to insulate against a global slowing of growth and for the long-term benefits of boosting the supply capacity of our economies. Infrastructure investment can also help channel excess global savings – a more productive pursuit than short-term asset price speculation. To support this, we want the World Bank (WB) to prepare a comprehensive assessment of infrastructure financing, including provision of facilities, identification of innovative sources of financing and technical support to formulate bankable pipeline projects.

Many middle-income countries (MICs) in Asia, Latin America and the Middle East have been in the middleincome trap for decades, struggling to remain competitive as high-volume, low-cost producers but unable to move up the value chain and break into more advanced innovation-based products and services.

Much more is needed for the transition to highincome status. Assistance is required not only on project financing, but also in the provision of technical assistance and capacity-building to accelerate the structural reforms needed to become – and remain – highincome economies. Rapid, sustainable growth requires high levels of investment. These investments will be in physical and human capital, including roads, information technology and other infrastructure.

We especially appreciate the WB and the International Finance Corporation (IFC) fostering a competitive private sector that has created new investment and employment opportunities in MICs. A robust domestic private sector is critical to increased growth, which can be linked to poverty reduction and improved standards of living in MICs. We encourage the WB and the IFC to expand their work to help provide small and mediumsized enterprises (SMEs) with greater access to finance. SMEs are critical for the economic and social development of MICs; play a major role in creating jobs and income for low- and middle-income people; foster economic growth and social stability; and contribute to the development of a dynamic private sector.

Indonesia will continue to reform its business environment to attract more investment, bring opportunity to a rising population and spur private sector growth. We want the IFC to work closely with Indonesia’s public and private sectors, offering global expertise and focusing support for business reform.

These efforts would help Indonesia implement a reform action plan to improve its rank on the WB’s annual “Doing Business Report”, as well as business licensing reform which aims to support efforts to reduce the costs and complications of doing business.

I reiterate our commitment to promoting financial inclusion as important to global economic development and poverty reduction. Indonesia strongly supports this initiative. We are committed to the financial inclusion Peer Learning Programme in the G20 to further facilitate cross-country information-sharing and technical dialogue. We are also involved in international fora to promote financial inclusion through the Global Partnership for Financial Inclusion, the Alliance for Financial Inclusion and the Asia-Pacific Economic Cooperation Financial Inclusion Working Group.

We also view supporting low-income countries (LICs) as important, as they continue to face challenges in sustaining growth. In this regard, the IMF can play a role by continuing intensive policy support, engaging in longer-term programmes and providing short-term financing. This will help LICs withstand external shocks, maintain macroeconomic stability, rebuild fiscal buffers and facilitate rapid recovery. We welcome the IMF’s decision to distribute the remaining windfall gold sales profits of $2.7bn, as part of a strategy to bolster sustainable resources for lending to LICs. While the legal requirements and domestic processes in some countries may not be straightforward, we are determined to give our best effort to secure assurances and implementation of this commitment in a timely manner.

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Agus D W Martowardojo

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The Report: Indonesia 2014

Banking chapter from The Report: Indonesia 2014

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