The assistance is intended to support the Indonesian government’s plans to attract investment and boost its economic competitiveness, World Bank’s director for Indonesia and Timor-Leste, Satu Kahkonen, said in a press release issued here on Wednesday.
“This reformation has potential to support the economic transformation in switching the commodity sectors to more value-added sectors. This (funding) will give the stimulus required for economic recovery post the pandemic,” he pointed out.
The financial support for the development policy operation (DPO) has been drafted to boost investment by offering more sectors to foreign investors, he expounded.
The assistance is mainly focused on gaining direct foreign investment, adding high-skilled professionals to the labour market, and boosting private investments in renewable energy, Kahkonen said.
The financing is designed to support Indonesia’s trade policy reforms, aimed at boosting competitiveness and economic recovery; improving access and accessibility to commodity prices of staple foods or raw materials; and, easing access to manufacturing inputs, he informed.
“The increase in investment, as targeted, will be triggered by this reformation, which also necessitates careful environmental management. The World Bank will work with other development partners to support the government in strengthening the environmental management efforts in all sectors,” Kahkonen highlighted.
The DPO is aimed at supporting big reforms in Indonesia’s trade and investment sectors, in line with the longstanding cooperative relations between the World Bank Group (WBG) and the Indonesian government, he said.
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The financing is fully aligned with the country partnership framework (CPF) recently adopted by the WBG, which identifies competitiveness strengthening and economic security as critical ways to reduce poverty and improve welfare, he added.
At present, big challenges in trade and investment have limited Indonesia’s capability for attracting direct foreign investment to develop its export potential, limiting the nation’s integration into global value chains and raising domestic food prices, Kahkonen said.
All these challenges have also slowed the growth of the manufacturing and non-commodity sectors, he pointed out. As a result, most jobs in recent decades have been created in the low-productivity commodity and services sector, which commonly generate incomes below middle-class wages, he added.
The coronavirus pandemic has led to Indonesia experiencing its first recession in two decades, a condition that has been exacerbated by the challenges faced by the economy to expand to more advanced sectors to create jobs with better wages and ensure higher productivity. (INE)
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