Coordinating Minister of Economy Darmin Nasution stated that the Policy Package to be issued by the Government consisted of various economic problem and would consist of four categories, among other Fiscal and Finance, Deregulation in Investment in the Industry and Trade Sector, Incentives for Smelters Development and Handling of Food problems.
The Policy Package related to Fiscal and Finance Consist of 6 or 7 points, among other Regulations foreign ownership in the property sector and Deb-to Equity Ratio.
Also Regulation on found expenditure for village development particularly on activities most important and beneficial to the rural people likes irrigation, bridges and roads.
The objective of deregulation was to review to existing rules which held back investment in industry and trading including the energy sector some were changed, some were simplified and some were totally revised, all including more than 100 rules.
As with policy related to food, one of them was distribution of rice-for-the poor (Raskin) for the 13th and 12th mouth to anticipate food shortage foe the poor during low season, i.e. extra Raskin for September and another extra Raskin for November.
The Government would probably announce Category Two regulations related to Deregulation to enhance investment in the industry and trading sectors, this week at the latest.
Sometime ago the Government had released a policy package, i.e. fiscal incentive called Tax Holiday. The Minister of Finance Bambang Brodjonegoro explained that the policy was designed to strengthen Rupiah and economy. The policy package would not just be for promoting export but also lift up people’s purchasing power.
Rupiah falling to Rp.14.000 per USD and slow pipelining of credit was because the world panicked as China devaluated their Yuan.
The word feared that China’s step might trigger a “current war” which might lead to serious instability of global trading.
Naturally in Free Forex Regiema Rupiah was a currency that could be feely traded for that matter the monetary authorities must agressively make market intervention to keep Rupiah value I accidence with national fundamental economy.
To be strong in the money market, forex reserves was the back up to rely on; but it should be bore in mind that Indonesia’s forex reserve never inched up from around USD 100 billion for over a year and amount was continually gnawed by BI for market intervention. Under the circumstances it was necessary for the Government not just to the monetary sector but also the enhance development of the real sector.
Government of BI Agus Martowardojo states that in July 2015 Indonesia had forex reserves of USD 107.6 billion, enough for financing 7 months of import or 6.8 months of import plus payment of overseas debt. DSR was safely above international standard of 3 month of import.
As told, Indonesia was also well protected by second line defense (SLS) such as Bilateral Swap to anticipate crisis.
Besides, Indonesia’s economic condition today was different from that of 1997 and 1998. Indonesia’s economic growth was minus 13.3% while today growth was positive at 4.9%. Indonesia forex reserves in 1997/1998 was only USD 23 billion, while in July 2015 it was USD 107.6 billion.
Meanwhile inflation rate in 1998 was 77.63% while today inflation was well under control, low and stable at 4% + 1% in 2015 and 2015. DSR in 1997 was 120% while today it was only safely at 33% of GDP.
In terms of finance stability, in 1998 CAR was desperately bad while NPL was high, but in June 2015 CAR of the banking sector was safely at 20% while NPL was only 2.6% - so it was very unlike that crisis of 1997 and 1998 would happen again.
Same how the Government and monetary authorities must stay on the alert in case heavier turbulence come to befall. Under such circumstances the Government’s willingness to listen to people’s aspirations and business people’s grievances was called for. Market players were expecting that the economy policy package to be issued by President Joko Widodo administration would find would find a breakthrough to solved problems and induce optimism among market players.
The policy package issued must be me diocre but it must distinctive. The public expected there would show results in the short term.
Businesspeople’s warning was valid because to learn from past experience, Government’s Economic Policy Package was only responded coldly by investors. For examples, policy packages for the financing sector which was poor in breakthrough values. Although fiscal incentives abounds, financing by financial institutions remained ordinary.
Businessplayers were expecting that the Government Policy Packages were in synergy with institutions like OJK and BI so the policy would be flexible macro-prudential wise but also enhance the role of financial sector to be more expansive. While being comprehensive they should prove to be supportive to be business world and the people, as proven by market’s positive reaction. (SS)
Business New - September 9, 2015