25/01/2012 (Jakarta Post) - Economists have warned the Indonesian government to remain modest as the future is uncertain and there is still a great deal of work to be done, despite the good economic performance in recent years.

In the midst of a global crisis that began in 2008, Indonesia has managed to maintain an average growth rate of 6 percent per year and, for the first time in 14 years, was awarded investment-grade rating in 2011.

The government, particularly President Susilo Bambang Yudhoyono and Coordinating Economic Minister Hatta Rajasa, at that point claimed the country had been successful in surviving the global crisis.

Economists, however, are telling the government to realize that achieving growth and investment-grade rating is not a goal in itself but is, instead, a sign of the hard work lying ahead.

University of Indonesia economist Faisal Basri said the government needed to look to the past and learn from it to understand the country’s success in achieving an investment-grade rating.

“In 1997, we also achieved investment-grade rating but, within a month, our rate was downgraded and eventually defaulted. It is very easy for investment grade to become degraded, and it is very hard to obtain as it is so closely linked to a country’s current account,” Faisal told The Jakarta Post on Saturday.

“Since 2009, our current account has worsened rapidly. This is a problem because current account reflects foreigners’ trust in a given country ... In our current account, our agricultural trading sector has suffered a deficit since 2007 ... In the energy sector, we also suffered at least US$20 billion worth of deficits. Manufacturing has also been struggling with the same problem.” he added.

“So, the threats looming from our abysmal current-account performance are right in front of our eyes. We use mining and commodity exports to cover the deficits, but their prices are extremely volatile and our dependence on them will drive us to over-exploit our natural resources,” he said further.

In a similar tone, Julius Baer Investment Solutions group head for Singapore, Lee Boon Keng, said the Indonesian government needed to realize that the country’s economic growth had primarily been driven by exporting commodities, such as crude palm oil (CPO), but that this could pose hidden dangers ahead.

Trade Ministry data shows that from January 2011 to November 2011, the country’s non-oil and gas exports stood at $148.45 billion, an increase of 27.79 percent compared with the same period in 2010.

Despite the country’s relatively significant growth in non-oil and gas exports in 2011, an economic think tank, the National Economic Committee (KEN), has warned that export volumes could decrease in 2012 due to the deepening global crisis, which may eventually drive overseas demand to plummet.

Other than sinking demand, Deputy Trade Minister Bayu Krisnamurthi also warned in October last year that the prices of commodities and goods could also fall in 2012.

To compensate for these potential losses in exports, Faisal believes that the government, if they want to achieve their targeted growth of between 6.3 percent and 6.7 percent in 2012, need to work on developing sufficient infrastructure to attract foreign businesses to invest.

“Otherwise, we are going to lose the momentum triggered by the investment-grade rating reward,” Faisal said.