Last year, to be exact on September 2011 there were still numerous economists, analysts and business players were confident that the monetary crisis that swept Greece would never affect Indonesia for many reasons. Among other the portion of Indonesia’s debt to European states were relatively small, i.e. below 10%. Relationship between Indonesia’s Financial Institutions and that of Europe was also relatively limited. In short, Indonesia would be safely apart from the crisis center in Greece which at later stage infected neighboring countries Italy, Spain, Portugal and Ireland.
It was not an exaggeration that Golden Sach, the global financial institution predicted that Indonesia would only grow by 5.4% before returning to the growth level of 6.3% in 2013. Goldman Sach economist for the Asean region, Mark Tan estimated that in the short run Indonesia’s economic growth would slow down due to external influences on the domestic market.
Economic growth in the following quarters would be lower as the market was vulnerable to external disturbances. According to Mark Tan, foreign ownership level at the domestic bond market which reached 30% made Indonesia more sensitive to capital flight to prevent global economic turbulence.
The bond market was the main cause of outgoing portfolio capital from Indonesia which caused deficit in balance of payment in Quarter I 2012. The ratio of portfolio against Indonesia Balance of Payment was growing and getting more volatile. This was the main challenge to the Government in managing USD liquidity at home.
Deficit of Indonesia’s balance of payment might swell in the event that global economy changed for the worse which would drive portfolio outflow. Bank Indonesia’s data had it that deficit of current transaction in quarter I 2012 was posted at USD 2,9 billion or higher than surplus of capital balance of USD 2.2 billion.
According to Goldman Sach, the external factor also made its great impact on Indonesia’s fundamental economy, especially on the inflation side. Goldman Sach research disclosed that Indonesia’s inflation mood was sensitive to Rupiah exchange rate basket currency of Indonesia’s trade partners or trade weight index (IDR TWI). Even 1% weakening of IDR TWI would cause inflation growth of 0.4% in Indonesia, one of the biggest countries in ASEAN. Today Indonesia’s inflation was influenced by two factories, i.e. (1) down turn of world’s oil price which had its positive impact and (2) Rupiah volatility which had its negative impact.
The Central Board of Statistics (BPS) stated that inflation rate of consumers price year to date in January – May 2012 was 1.15% or higher that inflation rate of same period of 0.51%. However, aggressive measures by Indonesia’s financial authorities on the moneymarket and lessened global economic uncertainty in post election era in Greece had eased external pressures on Indonesia.
Foreign Direct Investment (FDI) would still grow steadily because Indonesia’s attractive fundamental economy like the growing Number of young and productive people or the rising new middle class which was growing fast. With strong fundamental economy Indonesia might feel confident to rebound and grow by 6.3% due to recovery of global demand.
It was noteworthy that there were two channels by which Europe’s crisis were transferred to Indonesia, i.e. the financial sector and the trading sector. The effect of transmission by financial channel was depreciation of the Rupiah value through this year and downturn of the IHSG stockmarket and BEI Security Exchange.
It seemed reasonable that the Government, cq Bank Indonesia on behalf of the respective institutions or the bodies collectively had set up the Protocol Management Crisis (PMC) as a mechanism to anticipate the effect of crisis in Europe. Formation of this PMC deserved apperception as a form of caution of the two authorities by the time crisis had to be encountered directly of indirectly.
Although the impact was still at minimum, the weak economy caused by debt crisis in Europe was gradually touching Indonesia. This was felt with the downturning demand for export goods. In Aril 2012 last, Indonesia’s export value slumped by 3.3% against April 2011 although in January - April 2012 it still rose by 4.1% against same period last year.
The downturning export performance through the period of January-April 2012 was due to downtirning demand by Indonesia’s main trade partners as buyers of non oil-gas products like Japan, the USA, Singapore, Malaysia, South Korea and Thailand.
Among the many ways of the Government to strengthen economic resilience in the trading sector was to develop upstreaming industry such as mining. Therefore the Government restricted export of raw mining materials by imposing 20% export tax. The upstraming industry policy was among the Domestic Obligation (DMO) policies to ensure availability of raw materials for the domestic industry. The strategy was meant to promote people’s welfare through increasing employment opportunities.
In this case the Ministry of Trade had given their full support to the nation’s upstreaming process: among them was the revision on stipulations for certain mining products (Law no. 4/2009) which made it mandatory for export not in the form of raw material preparation of database of exporters and revision of export stipulations for tin bars, stipulations for export of fertilizers and delegation of authority in signing export permit through UPP.
As known, Indonesia’s total export in April 2012 reached USD 15.98 billions, down by 3.3% compared to April 2011. This included export of oil-gas USD 3.36 billion (up by 9.8%) and export of non oil-gas USD 12,62 billion (down by 2.4%) while total export of January-April 2012 reached USD 64.5 billion, up by 4.1% including export of oil-gas USD 13,3 billion (up by 12.0%) and export of non oil-gas USD 51.2 billion (up by 2.3%).
To keep export from dropping was important to keep Rupiah from sinking too deeply and to keep the position of forex reserves stable although Bank Indonesia was forced to continuously make intervention on the moneymarket.
To uphold discipline among exporters in paying up their export proceeds to domestic banks, in accordance with Regulations of Bank Indonesia (PBI) exporters were obliged to receive all Export Yield Forex (DHE) through the Indonesia Forex Bank in not longer than 90 days after date of xport Notification of Goods (PEB) or else exporters would be sanctioned.
In PBI no. 13/20/PBI/2011 particularly for PEB issued in 2012, DHE must be received by exporters through domestic forex banks not later than 6 (six) months after PEB date. Hence DHE of PEB per January 2012 should have been received 6 months in July 2012. As known, based on monitoring, so far there were still exporters who did not receive their DHE through domestic forex banks.
As the sanctions on violations would be put on July 2, 2012, by next July exporters had the potential to have administrative sanctions i.e. 0.5% of the nominal DHE which was not received through local forex banks, the minimum fine being Rp 10,000,000 and the maximum fine being Rp 100,000,000.00.
Exporters who failed to pay the said administrative fine would be sanctioned by way of suspension of export services by the Directorate General of Taxation. To ensure that the policy would be effective in tems of implementation BI had launched illumination Campaign to exporters and related institutions in many regions in Indonesia and continued to run monitoring over application of the rules by exporters.
In regard to the above, exporters were reminded to immediately receive their DHE through the domestic forex bank before the set deadline. BI also assured that this regulation did not restrict exporters in the freedom to use their DHE. Exporters were not obliged to convert their DHE into Rupiah and were not forced to deposit their DHE in domestic forex banks for any given period.
The turbulence which was felt in the domestic monymarket and stockmarket must be well observed moneymarket and stockmarket must be well observed and anticipative steps must be taken to prevent the effect from expanding and wider which might hindrance further economic growth. The monetary authority or fiscal authority must be able to send positive signals in the eyes of market players to keep them form being nervous and stay strongly confident.
Not less important in this uncertain economic atmosphere caused by the crisis factor in Europe was that for the short term related financial authorities that for the short term related financial authorities that for the short term related financial authorities refrained from making anti-market policies which would but create negative sentiments. The must be underscored because there could be intuitive acts by leaders who tend to adopt new unproductive policies which were probably not urgent.
This warning was necessary because lately controversy often break out among stakeholders about Government’s policy which were not synchronous as indicated by overlapping or contradicting regulations issued by ministries. Lack of coordination, harmony, and synergy among ministries would create negative perceptions which were disadvantageous to the nation’s future economy.
Business News - June 27, 2012