With suspension of FFR increase by the Fed on 16 – 17 September last, the world’s economy had to face longer uncertainty and there was growing speculations among the merging economies including Indonesia.
What’s more USD strengthened all year through causing Asian currencies to slump. Moreover when Governor of the Fed New York William C, Dudley stated that the policy might be executed gradually. This means that soon or late increase of FFR would be realized.
President of the Fed San Fransisco John Williams also expected FFR would be increased gradually and reminded there would be increase of house price. Strategist of foreign currencies predicted USD and US yields would increase when the Fed increase FFR this year.
Janet Yellen stated on September 24 last that she believed the Fed would increase FFR this year for the first time in once decade.
To Indonesia, it was known that weakening of Rupiah would mean a strong below to national economy. As known strengthening of USD would injure economy and more and more people were losing their jobs.
If economic slowdown continued it was not impossible that Indonesia would again fall to become a poor country. Increasing unemployment, crumbling businessworld and capital outflow would mean bad mark of the Government’s report card. The Government’s answer to the problem was that classical “wait for the storm to subside”.
The storm would be over, tackled or not, be cause it was external factor. But how much lost must be borne by the business world Workers dismissals was more than just a treat, it had become reality. Now producers could not buy components which were mostly imported.
Many companies had to reduce the number of employees due to reduce production output. Many companies had even run out of business.
Chairman of APINDO Haryadi Sukamdani stated that through September 2014 there had been 27,000 cases of workers dismissals due to various causes among others Rupiah weakening and domestic economic slowdown.
Data of BPJS Labor Insurance had if there had been more than 724,000 employees who had liquidated their pension fund through January-September 2015. Of that number 210, workers took their fund in September 2015.
The Government argued that dismissals was due to various reasons, among others weakening of Rupiah. Companies had to maintain efficiency as production cost increased. Any many of them were dismissed by not extending the contract.
There were 3 categories of dismissal: company totally closed and all workers must resign, company reduced the number of workers and the potential of workers being dismissed.
Broadly speaking business was really hard today. Many truck rentals had to dismiss their workers. For example in Tanjung Priok Harbor, many container carrier trailers were parked at the garage as there were no cargo to be carried and truck rentals hat to return their armada to the creditors as they were unable to pay installments.
This Indonesia’s busiest harbor was now quiet. There were stacks of containers but were empty containers. Large scale dismissals was also going to happen at the loading unloading sector, in flowing goods were continuing to decline. Soon or late dismissals was bound to happen.
Compared to other countries the effect of global economic crisis on Indonesia was the gravest. This was because competitiveness of national products was low.
To minimize cases of dismissals, the Government must strive hard to propel economic growth time after time especially in times when infra structure projects were well underway. It was heartening to know that at least data of cement sales was positive which indicated that some of Government infra structure projects were underway.
In Q II/2015 BPS announced Indonesia’s economic growth was 4.67 (y o y), lower that Q I at 4.7%. the Government felt sure that growth percentage in Q III and IV would be higher because data of ASI showed cement consumption in august 2015 rose by 11%. In September 2015 growth was 6% against same period last year.
Based on data of cement consumption, economic circles predicted Indonesia’s economic growth in Q III and IV would be around 4.8% - 5.1%. By end of year, economists predicted Indonesia’s economic growth would be around 4.8% - 5.0%.
Indonesia’s economic growth getting close to 5% by year end was also predicted by some international agencies. Recently ADB axed Indonesia’s growth prediction this year from 5.5% to 4.9%.
Although Indonesia’s economic growth was predicted no to reach 5% by year end, the attainment was rated as notably satisfactory compared to other countries being in deeper recession. Beside expenditure, propeller of Indonesia’s economic growth was people’s consumption which was still thankfully high.
People’s consumption improved in line with multiplier effect from infra-structure projects. Infra structure projects increased job opportunities which increased people’s purchasing power.
In this respect the Government responded well to businesspeople’s request by issuing economic package in September 9 last followed by chapter II on September 29. The Economy Policy Package might not show their fruits instantly as they were designed for the medium and long term.
The Government’s deregulation package was no instant remedy for Rupiah which desperately weakened. It was the task of BI and OJK to act and synchronize to implement the policy.
The Economy Policy Package part 2 was rated as more applicable, businesspeople were highly expectant the result would be felt. For example allowing tax discount to exporters who deposited their forex-from-export in domestic banks; or the permit application procedure for investors that lasted for not more than 3 hours.
It must be appreciated that the Government never felt that the two Economy Policy Package was enough for stabilizing economy. Therefore President Joko Widodo would release Phase 3 Economy Policy Package to complement the earlier two package, aimed at restoring economy for the short and medium term.
To produce quick result, the Government was giving incentives to strengthen people’s purchasing power, among others by lowering bank interest. Banks must enhance efficiency that they could lower bank interest.
Lastly, PERTAMINA was asked to re evaluate price of oil. The Government hoped there was still room for PERTAMINA to lower oil price no matter how small. By such policy the Government hoped the economic storm would soon subside whereby the people could look forward to a better future. (SS)
Business News - October 7, 2015