BANKING SECTOR AS INDUSTRY FACILITATOR

Credit growth in 2012 is estimated to reach 23%. A sufficiently good figure in the midst of sluggishness of world's economy. Such a rate of credit growth contributes to economic growth which reach­es around 6.3%. What about year 2013?

Bank Indonesia projected that credit growth will reach 23% - 25% with growth in Third Party Fund (DM) at 18%. These two assumptions are expected to support target of economic growth set at 6.8% in accordance with APBN (State Budged 2013 assumptions. It is a quite realistic projection.

Indonesia's economy is projected to grow satisfactorily this year. The economic growth contributed to growth of some industries in Indonesia in 2013. Bank Indonesia predicted Indonesia’s econom­ic growth at 6.2% - 7.1%. And, in 2014, economic growth is projected to reach 6.3% - 7.3%.

The growth rate predicted by Bank Indonesia is higher than economic growth in last year. Based on data of the National Bureau of Statistics (BPS), during three quarters of 2012, Indonesia's economic growth was above 6%. In the first quarter 6.3%; in the sec­ond quarter 6.4%; and in the third quarter 6.17%.

Economic growth which is predicted to be on the right path gives a meaningful contribution to growth of some industries. One of factors that sup­ported economic growth this year is investment. Many analysts and economists considered that investment will contribute to growth of a number of industries.

Industries that will be growing in 2012 are construction sector as investment in Indonesia is continually increasing. Investment increase has become a trend in the previous years and in the next few years. Growth of construction sector could also be seen from import of capital goods which is increasing each year.

Construction sector in Indonesia is prospec­tive in 2013. It is predicted to grow by more than 7.5%. Transportation and communication sectors are also predicted to experience a satisfactory growth. This can be seen from growth in the number of us­ers of telecommunications equipment and motor vehicles. This sector is predicted to grow by 10% - 15%. A bright prospect will also be experienced by the fi­nancial sector. Growth of this sector is reflected from growth of financing, funding, and profit acquisition of corporations engaged in financial sector.

These sectors could have a good potency in 2013, while other sectors are relatively normal. Such as agricultural sector which is growing not too sig­nificantly, but will be slightly better as it will prob­ably be supported by increase of prices of agricultural commodities in 2013 in line with recovery of United States’, China’s and Japan’s economies.

The Industry Ministry projected that manufac­turing industry will grow up to 7.1 % this year. There is investment increase in some sectors, namely auto­motive, fertilizer, chemical, and cement sectors. Even though economic condition in the European Union is highlighted by uncertainty, it is believed that perfor­mance of manufacturing industry sector will grow satisfactorily.

But, the challenges that will be faced in 2013 are still around weak infrastructures and high cost of investment. In order to solve problems in industry sector, the government must maximize provision of fiscal incentive, such as tax reduction in the form of tax holiday, tax allowance, Import Duties Borne by the Government (BMDTP), and exemption of Sales Tax on Luxury Goods (PpnBM).

In addition, the government will solve investment problems, such as regional spatial planning. In connection to growth of manufacturing industry, penetration of new export markets must soon be enhanced. Enhancement of the attempt to control import by non-tariff barrier policy could accelerate industry sector.

The opening of export markets in Middle East, Africa, East Europe, and Latin America must be done by manufacturers. In line with this, controlling import through the application of Indonesian National Stan­dard (SNI) is necessary. The government could invite all institutions, state-owned enterprises, and private sectors to consume local products to support indus­try competitiveness. Consumption of local products could increase demand for national manufacturing products, therefore it must be supported by all stake­holders and policy makers.

But, in the midst of optimism over growth of manufacturing industry, there are some matters that should be anticipated by the government and industry operators, they are electricity price increase of 15% that could hamper growth, especially micro, small and medium business operators in manufacturing sector.

The role of the banking sector in supporting national industry growth should not be ignored. The banking sector this year will remain prospective even though it will be facing many challenges.

Contribution of banking credit could grow by 23% - 25% as seen from infrastructure demand and investment. Capital will become a very crucial factor in increasing credit expansion. The economic crisis in Europe is beneficial to Indonesia because the national banking could strengthen capital in order to increase credit disbursement.

Growth of banking credit in 2013 is like a two side of the same coin. On one side, it is good for the banking. But, on the other side, capital becomes a factor that must be paid attention to. In order to achieve capital sufficiency for doing expansion, the banks must perform a variety of attempts, for example, to disburse fresh fund, to issue new shares through rights issue, and to invite new investors.

In the midst the economic crisis that hits almost all advanced countries in Europe, Indonesia’s economy is proven resilient. Bank Indonesia’s data shows that Indonesia’s per capita income as of the end of 2011 reaches around USD 3,000 or a sixfold increase from the figure during the Asian crisis in 1997/1998. Now, the Indonesian society has entered the middle-class group which is a transitional strength.

This transitional strength is the factor that supports economic expansion coupled with the appearance of new centers outside Java. In the past eight years, Indonesia’s economy recorded a growth of averagely 6.1% - 6.2% per year. This rate is one of the highest in the world.

An article in a London-based magazine, The Economics, of November 10, 2012 edition stated that Indonesia is a country with the most stable eco­nomic growth in the world in the past 20 quarters. This magazine also acknowledged Indonesia as a pio­neer in the application of monetary and macro prudential policy mix.

Indonesia is considered capable in mitigat­ing credit risk and preventing capital outflow without having to raise interest rate. And, Bank Indonesia’s policy of October last year took a per-emptive action by easing monetary policy. It is reasonable if there are many who are optimistic because this country has a basic capital, namely an economy which has been proven stable, domestic demand based on a grow­ing middle-class, and availability of a quite adequate policy space to absorb global risk.

Fulfillment of these three economic strength basis will increase confidence of economic operators so it could accelerate continuation of capital accumulation process. Additionally, with the support of increasing government’s capital spending, Bank Indonesia projected that investment growth rate will increase to 11.6% - 12.0% in 2013. Investment increase will have an effect on society’s purchasing power. And, as a consequence, growth in Household Consumption (KRT) in 2013 could be maintained at 5.0% - 5.4%.

This is in line with improvement of export performance which is predicted to grow by 5.4% - 5.8% in 2013. It is believed that the national economy will grow 6.3% - 6.7%. And, growth achievement will reach move toward the maximum projection, namely 6.7% if binding structural constraints are solved.

Meanwhile, inflation is under control at a low level. Even though economic growth is projected to remain high, inflation pressure in 2013 will still be under control within the target range set at 3.5% -5.5%. With macro economic condition which is un­der control, the banking sector will be encouraged to perform credit expansion in order to support national industrial activities. This is in accordance with “bank follows industry” philosophy where banking plays a role as facilitator of industry sector.

 Business News - January 16, 2013