Monday, 22 April 2013


Amidst uncertainty of global economy, Indo­nesia chalked up economic growth faster than other nations. Somehow many people questioned quality of economic growth of a country which was supposed the second highest next to China.

Indonesia’s economic growth in quarter 3 of 2012 was under 6.17% amidst world’s adverse economic condition. The economic growth of 6.17% was sustained by domestic consumption (around 53%) and up jump of invitation (around 33%1).

Economic growth over the period of July-Sep­tember was slower compared to two previous quar­ters, i.e. 6.4% and 6.3% respectively. The down­turn of quarterly economic growth was on account of declining export due to lessened global demand. Through January-September 2012, export value slumped by 6.06% against same period the previous year to become USD 143 billion.

Although slowing down, in fact realization of economic growth in quartet 3 2012 had met analysts prediction. Most analysts and economists rated realization of economic growth in quarter 3 was not bed at all. As footnote, economists predicted eco­nomic growth of quarter three would be around 6.2% to 6.3%.

In view of economic growth in quarter three which was only 6.17%, the Central Statistics Board (BPS) and even the Government were beginning to be pessimistic about attaining the growth target of 6.5%. Analyst and economists shared the same view they doubted that economic target growth would be attained. According to their calculation, economic growth of 2012 would be merely around 6.4%.

But then hope breezed out that investment and realization of Government’s spending could lift up economic growth in quarter 4 to 6.5% so target for that quarter would be met. The logic was that eco­nomic growth of quarter four must be at least 6.7% so the target of 6.5% for the year could be met.

Analysts and economists rated that the target to be pursued by the Government was hard to attain amidst down turning export performance. Long before the 6.5% target was announced, international monetary institutions like IMF announced, international monetary institutions like and the World Bank had set forth the same predictions.
In World Economic Outlook of October 2012 edition, IMF projected Indonesia’s economic growth at only 6.0% for this year 2012. The reason was that recovery of global economic slowdown was dragging slow. European states still had to struggle to escape from the tangles of debt while US economy was losing steam till next year. On the other hand the impact of global economic crisis had spread out emerging markets especially China and India.

It was noteworthy that Bank Indonesia was still optimistic that the nation’s economy would con­stantly strengthen this year. Survey unveiled that BI as Central Bank estimated Indonesia’s economic growth this year would grow by 6.4%, which was higher then the previous projection of 6.3% because of growing domestic consumption and growing investment.

BI’s survey in October last unveiled that the propelling force of economic growth was domestic consumption and investment. Household consumption far the past six months grew by 4.8% on the average. Meanwhile investment also increased by 9.6%. Strengthened by Government expenditure which was around 91% and downpressing import to the level of 9% alone, projection of economic growth of 6.4% this year was quite reasonable.

Is this the point of arrival? Not yet. The Government still had to consider the impact of economic growth for the people. As known many accusations were addressed to the Government that Indonesia’s economic growth did not correlate with the quality. Among the indicators was poverty figure.

Sometime ago, the Ministry of Finance Agus Martowardojo admitted that poverty figure had not declined significantly. He was expectant that progressed economy would drive pro-job and pro-poor program previously President Susilo Bambang Yudhoyono said the same thing.

The Government admitted that poverty fig­ure of around 20 million to 30 million was notably high. This year the Government set target for poverty figure to become 9.5% to 1056% from the previous 11.9% of total Indonesian population. Not less inter­esting was that economic growth means absorption of a vast number of workforce.

BPS noted that the total number of employed workers per August 2012 lest was 110.8 million peo­ple, an increase of only 2 million people compared to 2012 or 1.2 million compared to August 2011. All in all unemployment level per August 2012 reached 6.14% or slightly dropping compared to February 2012 which was 6.32%.

And yet Government's target had it that 1% of economic growth could accommodate 450,000 workers. Assuming that economic growth came to 6.17% it meant that 2.7 million workers would be ac­commodated. Only trouble was Indonesia’s economic growth created wider disparity of income.

The National Planning Development Board (BAPPENAS) had noted gini ratio had come to 0.41 in September 2012 last, this figure rose horn 0.35% in 2007. The higher the gini ratio the wider the income gap. All unpleasant accusations must be responded by the Government with better and more focused pol­icy design.

There ware grievances that the emerging mid­dle class in Indonesia caused by economic growth resulted in widening social gap. The structure of economic growth was also energized by the service sec­tor like communication and finance. On the Other hand index of Human Development did not change drastically.

UNDP noted that Indonesia’s index of Hu­man Development (IPM) was in 124th position among 187 countries. Indonesia’s position was below South Africa but above Vanuatu. Compare this against the Philippines which was in 122 position and Malaysia in 61 position. As footnote economic growth of the Philippines (4.5%) and Malaysia (5%) were below that of Indonesia.

All in all the Government seemed to have to work hard to realize a high quality development amidst global economic uncertainty. This could begin with better allocation structure in the APBN State Budget 2013 and so forth especially in relation to size of subsidy.

The size of subsidy for oil had its serious impact on APBN State Budget it even burdened the Government in making expansion in the regions in In­donesia. For that matter the efficiency strategy by abolishing oil subsidy should be carried out so the fund could be allocated for more productive spending.

There were some options of strategies for strengthening APBN State Budget structure. i.e. ad­justment of oil price, limitation of oil consumption, conversion from oil to gas, green automotive and hedging of oil price. The size of oil subsidy had its impact an many things. For example less opportunity to regulate government expenditure to be more pro­ductive and sensible, oil consumption being herd to control which made oil reserves to dry out faster, while it would encourage misuse of cheap oil but dis­courage development of alternative energy.

The condition had it s impact on lessened op­portunity to control distribution of subsidized oil to be on-target and meet the sense of justice, while it also undermined nature conservation program. To minimize the risk, there were recommendations to reduce oil subsidy in 2013 which could be done by combining several policies. This became a pressing necessity to consider that the amount of subsidy kept swelling time after time.

The point was that subsidy burden in APBN budget needed to be controlled to make fiscal healthier and prevent excessive consumption. The reduc­tion of oil subsidy could even enlighten APBN burden. The portion of energy subsidy which was still big, reduced government’s discreet to make expansion of infra structure and other important programs.

Being the biggest portion in the budget struc­ture, the oil subsidy automatically expended year af­ter year. There were even some factors which were rated as the cause of high oil subsdy.

Firstly, world’s oil price and Rupiah exchange rate value. Increased oil price and depreciation of Ru­piah caused energy subsidy including oil subsidy to soar up.

Secondly Oil consumption kept constantly in­creasing by volume. The nation’s growing economy and increased number of vehicles could cause high consumption of subsidized oil.

Thirdly, selling price of subsidized oil was lower. The wider the disparity between subsidized oil and non-subsidized oil the greater the migration of consumers from non subsidized oil to subsidized oil.
Fourthly, distribution of subsidized oil which was off-target. In this case most of the subsidized oil was still enjoyed by consumers of the middle class and up. Therefore efficiency strategy of subsidized oil must be exercised whereby the saved fund could be allocated for more productive spending. The Gov­ernment must constantly strive to re-allocate subsidy fund for better expenditure.

To make a breakthrough, the Government’s courage was needed to make price adjustments of subsidized oil. For example, to increase price by Rp 500 per litre for private cars; further all public trans­portation for passengers and cargo must use gas as fuel, and four-wheel private cars were forbidden to use subsidized oil. It was perhaps by such a courage that economic growth of good quality could be maintained and be enjoyed by all people.

Business News - November 30, 2012

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