Private Sector Needs Support to Play Bigger Role
The World Bank in its Global Economic Prospects Report released in January 2022, estimates that economic growth will slow from 5.5 percent in 2021 to 4.1 percent in 2022 and 3.2 percent in 2023.
Minister of Trade M Lutfi, Minister of Communications and Informatics Johnny G Plate, Head of Committee B20 Shinta W Kamdani, Coordinating Minister for Economic Affairs Airlangga Hartarto, Minister of Foreign Affairs Retno Marsudi, and Minister of SOEs Erick Thohir (left to right) take a group photo at the opening of the inception meeting B -20 in Jakarta, Thursday (27/1/2022).
Businesses in developing countries play an important role in promoting inclusive and sustainable economic recovery. However, the business world needs government support to carry out this role. On the other hand, the business world also needs to draw up concrete actions to address the gaps and threats of the climate crisis.
JAKARTA, KOMPAS — Global economic growth is expected to decline this year amid a number of uncertainties. The slow pace of the economic recovery will be experienced by developing countries. In the midst of this challenging situation, the private sector and the business world should play a greater role in achieving an inclusive and sustainable economic recovery from the impact of the Covid-19 pandemic.
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The World Bank in its Global Economic Prospects Report released in January 2022, estimates that economic growth will slow from 5.5 percent in 2021 to 4.1 percent in 2022 and 3.2 percent in 2023. The economic slowdown is predicted to occur as a result of rising inflation, growing uncertainty over the emergence of new Covid-19 variants, as well as the ending of various fiscal and monetary stimulus packages.
The World Bank’s managing director of development policy and partnerships, Mari Elka Pangestu said during the B-20 Indonesia Inception Meeting on Thursday that the trends in the global economic recovery would not be the same from one to country to another. Although economic growth is projected to slow to 3.8 percent in 2022 and 2.3 percent in 2023, this will be enough to restore economic growth and boost investment in developed countries to pre-pandemic levels.
With these conditions, nine out of 10 developed countries are expected to be able to return to the pre-pandemic economic growth rate in 2022. The opposite situation will occur in developing countries, which must spur economic growth to 4.6 percent in 2022 and 4.4 percent in 2023.
With this growth rate, only four out of 10 developing countries are expected to able to return to pre-pandemic levels by 2022. “What we are currently experiencing is an unequal recovery. This slowing economic growth will lead to higher inequality, both between developed and developing countries and in every country," Mari said,
In her speech to business leaders of G-20 member countries in the B-20 forum, Mari emphasized the importance of the private sector's role in developing countries to achieve inclusive and sustainable economic recovery.
In addition, there is also a need for real action from business actors to overcome the gaps and threats of the climate crisis.
The B-20 forum, which represents businesses from G-20 member countries, is also expected to produce policy recommendations that need to be followed up by the governments of each country to support the business world. In addition, there is also a need for real action from business actors to overcome the gaps and threats of the climate crisis.
“There is no global economic recovery without the economic recovery of developing countries, and there is no recovery without the role of the private sector. This is an important issue that must be highlighted, especially considering that the G-20 presidency this year is held by a developing country," she said.
Support
Mari said governments support the private sector, especially micro, small and medium enterprises (MSMEs), which generally form the backbone of the economies of developing countries and absorb more workers than large companies. Financial assistance, market access and support for digital transformation are among the most important things needed by MSMEs.
Yanto arranges plastic bags of aquarium fish on Thursday (2/4/2020) at an ornamental fish farm near Mount Sindur in Bogor regency, West Java. The Covid-19 outbreak in Indonesia has disrupted the activities of thousands of micro, small and medium enterprises (MSMEs), including the ornamental fish trade. Sales of ornamental fish have fallen more than 50 percent since the outbreak began in early March, primarily due to the closure of Jatinegara Market, the center of the ornamental fish trade in Jakarta. The “stay at home” policy has also contributed to the decline in sales, as students are key customers of ornamental fish traders.
On the other hand, support for big businesses is also needed in the form of certainty in the business climate and handling of the pandemic, because with the current recovery, a number of business sectors are still unable to restore the employment absorption rate. It seems difficult to restore the lost jobs due to the pandemic, even though the levels of production and sales have approached pre-pandemic levels.
“This is due to high uncertainty. Therefore, ensuring certainty for the business world is the main key to encourage economic recovery and restore the labor sector, which is still disrupted," said Mari.
According to him, it needs an active role from the private sector through green and sustainable investment to achieve the carbon emissions reduction target.
On the same occasion, UN Special Envoy for Climate and Finance Mark Carney reminded that governments would not be able to carry out their commitment to solve the climate crisis alone. According to him, it needs an active role from the private sector through green and sustainable investment to achieve the carbon emissions reduction target.
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However, the active role of the private sector should also be supported by clear government policies that are in line with the commitment to overcoming the climate crisis, he said. Green financing support and concrete technology transfer assistance from the global community would also be needed to encourage energy transition in developing countries, he added.
"The clearer the policies, the more businesses are willing to invest, encouraging green investment, faster decarbonization, and sustainable economic growth equally in developed and developing countries," said Carney.
Recommendations and investments
On Friday (28/1) evening, the B-20 forum continued with a task force meeting representing six major sectors, namely the renewable energy and climate change task force; the digitization task force; the future work and education task force; the finance and infrastructure task force; the women’s business task force; and the trade and investment task force.
Each task force included representatives of business leaders from developed and developing countries.
Shinta W Kamdani
The chairperson of the B-20 Forum, Shinta W Kamdani said the task force meeting would discuss the proposed policy recommendations and concrete programs, which would then be put forward during the G-20 Summit in November 2022.
“These task forces not only discuss issues related to the interests of Indonesia as the host, but also issues of global concern. However, this meeting is indeed an opportunity for us to discuss investment and collaboration opportunities, including those related to the development of the new capital city," Shinta added.
According to PT Jababeka Infrastruktur’s managing director, Agung Wicaksono, who led the renewable energy and climate change task force, three crucial points were proposed as policy recommendations, business plans and investment opportunities.
First, the effort to accelerate the transition to sustainable energy through more conducive public policies. Second, a strategy to ensure a gradual, safe and fair energy transition, especially for developing countries. According to Agung, mitigation measures are needed so that the transition does not result in crisis and brings about more problems for business actors and the community.
"Third, global cooperation to promote energy security and anticipate energy crises, while we accelerate the transition to the use of renewable energy," he said. (AGE)
(This article was translated by Hendarsyah Tarmizi)
