Jakarta, CNBC Indonesia – Industrialization, which is currently being intensified by the government of President Joko Widodo (Jokowi), is considered to have failed. This was disclosed by senior economist Faisal Basri.
Faisal assessed that the level of investment in Indonesia was relatively high compared to other countries. But unfortunately, these investments were not managed properly, not to mention that the majority were intended for the construction sector in the form of buildings, offices, malls and so on, which according to him had no impact on the production side. Meanwhile, investment in machinery and equipment is only 10-11% of the total investment.
“The use of investment in Indonesia is wasteful, not of good quality, that’s it, this is the investment that I showed you earlier. If you look at the majority of the blue ones, what shape are they? buildings, buildings, offices, all kinds of construction buildings, these buildings are for example malls, it sells more and more imported goods,” he explained to CNBC Indonesia, Friday (10/2/2023).
“So investing in buildings to expedite the entry of imported goods, yes, the economic benefits are small, the benefits are big, in what form? Machinery and equipment are almost certainly called industry, but look at how much they can produce various types of goods, only 10-11% real,” he continued.
He considered that President Jokowi did not encourage the acceleration of industrialization but only focused on completing infrastructure projects. That is what causes the low industrial facilities and capital in Indonesia.
“Pak Jokowi didn’t ask for the acceleration of industrialization or not, but all infrastructure projects were completed before he stepped down, so more buildings had to be completed, that’s the point. The industry is so stupid that’s why Pak Jokowi rarely talks about industrial vision, rarely, what he talks about is downstream ,” he said.
Faisal’s statement is related to the President’s request some time ago that his staff immediately complete infrastructure projects before 2024, including the national capital project (IKN).
In addition, according to Faisal, the cause of the failure of industrialization in the Jokowi era was the reluctance of banks to extend credit to the goods production sector. According to Faisal, one of the developing service sectors is banking, but unfortunately this sector is channeling its services back to financial services. Therefore, industrial capital did not develop.
In his opinion, banks actually help support state finances by becoming the biggest players in purchasing state bonds rather than channeling credit to the public. as a result
“It’s a bit hard for me to say no, I’ll show you again, the culprits are all the government. Don’t believe it? I don’t want this slander, I’ll show it so the government has more debt, said Mrs. Sri Mulyani, it’s safe, yes, it’s safe, but look at the government’s behavior who has more and more debt, who has bought the most government debt? explained the bank. This was before the crisis (2020 due to Covid-19) banks were buying, rather than distributing credit, to buy government debt,” he explained.
“As much as 31.4%, so almost a third of the government bonds were purchased by banks, especially those refusing to distribute credit to industries,” he continued.
Furthermore, he said that the Indonesian economy was getting sicker since the large number of government debt securities went unsold during the pandemic. As a result, it was purchased by Bank Indonesia through a burden sharing agreement. According to him, this has exacerbated the proportion of the economy in which half of the government’s debt is filled by the central bank and banks.
“So from service to service right, financial services to financial services, now confirms the quality of our growth. In my opinion it’s not entirely the bank’s fault but the government’s fault,” said Faisal.
He considered that this mistake stemmed from the government’s mistake in making assignments to State-Owned Enterprises (BUMN) banks. Where in practice state-owned banks inject funds to companies that cannot pay debts and form consortiums on infrastructure projects.
“Banks have never been asked to extend credit to industry, so it’s not entirely the bank’s fault. So the assignment was wrong,” concluded Faisal.
(tps/ayh)
