Tuesday, 9 July 2013


In the post reformation are since 1998 till now, Indonesia’s journey had passed through ups and downs. Democracy, which the nation had been trying to build, had it consequences. In some cases, the social energy had been widely misused for counter productive actions. Demonstrations by some of the elements of the national as an expression of discontent were implemented in undesirable street parliaments.
People’s protest was expressed in counter productive ways as they did not know what else to do. On the o0ther hand the government was rated as not doing their best in communicating with the public. The result was that the people felt they were a distance away from the government. Acts of rejection to the government’s policy busted out all over the country as communication was totally stuck on a dead end. A clear example was the waves of demonstrations against fuel price increase.
In this context, noteworthy was the opinion of a national business figure whose mindset was pure and his horizons was wide. He voiced his expectations inspired by the hope of many business people and insisted the government to troubleshoot some elementary problem that hindrance the national economic system. So far Indonesia was rated as being flattered and buoyed by praises and compliments by other nations about economic growth an stability.
It was Chief Executive Officer [CEO] of Lippo Group James Riady who, as speaker at the Summit Meeting of All Indonesia Chief Editors 2013 at Nusa Dua Bali last week [13/6] stated that the government’s firm attitude was necessary to overcome seven major issues which entangled this 250 million populated country.
The seven issues were [1] attitude of government’s elite [2] fiscal management [3] human resources development, [4] natural resources development [5] regional development [6] rule of law to assure business climate and [7] political condition.
James Riady saw the tendency of the political elites in Indonesia being self contended about short term economic performance.
James said that was true that Indonesia had become the best country in the world. He disclosed it in his presentation entitled “To Build Economic System in Indonesia.” James appeared with the Coordinating of Economic Minister Hatta Rajasa, Minister of Energy and Mineral Resources Jerro Waccik, Head of Ntional Economic Committee [KEN] Chairul Tanjun, President of Pertamina Karen Agustiawan, Chairman of the Indonesia Community of Renewed Energy [METI] Rahmat Gobel and the Director of Investment Planning and Risk Management PGN Wahid Sutopo.
James said that the soothing flattery by other countries that praised Indonesia as the most prospective country in the world had buoyed national leaders but brought negative impact on the collaboration concept between the Government, private sector and foreign investors. The principle of collaboration of the said parties became unclear; this must be clarified to convince investors as they wished to see firmness.
However, James was optimistic that the emergence of a raising middle class might enhance a positive agenda amidst great challenges that Indonesia had to face. In his opinion, the rising middle class was supportive to positive agenda in spite o the hard challenges.
On the other hand, James disclosed that in a global situation full of uncertainly, the business world saw weaknesses at home in fiscal management. On the other hand, labor was also a handicap factor for investors. As known the law for working environment was still full of imperfections. To build a nation means to build human resources and natural resources. It would be easier by physical transformation. On the other hand, social transformation the people, their education, their health must be transformed.
James also highlighted on the management of natural resources, especially in the effort to strengthen national food resiliency. In this case he saw that the situation was not heartening. He stated that other challenge for the government was how to build regions in the post reformation era.
James rated that since the principle of regional autonomy was exercised, many problems surfaced to create uncertainty. The people could see how regions could be built. This national had exercised regional autonomy system to build regions, but the capacity of regions to exercise the system was still a challenge.
Even the supremacy of law was not well implemented as there were still horizontal conflicts and other problems that made investors step back. Therefore implementation of the rule of law was absolutely necessary including efforts to prevent, balance, and neutralize obstacles. Other problems was political condition in Indonesia, James said that in Indonesia there were 550 regional heads consisting of Governors, regents, and mayors.
The regional heads were elected every 5 years. By calculation, every week there were 2 regional elections in Indonesia. These were great events; not to mention Presidential Election next year, and election of the legislative members. A situation as such had the potential to increase risk and affected many factors. For that matter political problems were unavoidable but must be well managed.
Seven strategic views of a James whose background was businessmen were the things which encircled Indonesia’s economy and must be responded by the government and all the people. In particular, the government’s inability to tackle various issues would trigger negative sentiment in the market. In the cruel moneymarket, market players would eventually “punish” the government. This was evident in times when the government was rated as slow in reducing energy subsidy especially oil fuel when the market was judge.
The weakening process of Rupiah lately, which came close Rp10.000 per USD was undeniable fact. It seemed tat the market had lost patience when there was no government sensitivity to crisis. The punishment materialized in the fact that they withdrew USD fund from Indonesia as they believed that the government was keeping flame in a haystack which might flare up any moment.
The government’s insensitivity to cirri was visible in the indecisiveness in increasing fuel price. The government even threw responsibility away to Parliament by saying that approval of oil price increase depended on approval of APBN State Budget 2013 which stipulated also social compensation fund.
The fact was that although House had given signal how much the compensation fund would be according to APBN-P 2013, they still could not firmly take action to increase fuel price. Instead the government was busily making political deals with coalition parties which were regarded as more important than to announce oil price increase.
On the other hand, to increase oil price was a pressing thing as APBN burden was getting heavier. Since 2009, oil price was never increased while world’s oil price skyrocketed and oil is non-renewable energy so supply was limited. Ironically Indonesia had to import expensive oil and sell it cheap at home by giving subsidy.
The result was that in quarter l 2013 Indonesia imported oil worth USD 10.8 billion against the previous USD 9.9 billion in quarter l-2012. This had caused USD 6.5 billion deficit in oil-gas. Other proof of government’s insensitivity to crisis was in the fact that the Financial Minister’s chair was let to be vacant for quite a long time. The financial sector seemed to be let to fly auto pilot yet was a strategic sector which was by nature liable.
Thanks God that unlike the Government, Bank Indonesia was more aggressive in increasing BI rate from the previous 5.75% to 6% in the hope that USD holders would release their money and re invest it in deposits, savings account of fixed deposit in Rupiah. By releasing USD to the Indonesia moneymarket, dollar supply in Indonesia would increase to exchange rate value of USD against Rupiah dropped or Rupiah value against USD increased.
The Central Bank realized that there was cost to the decision o increase BI rate, i.e. increase of credit interest rate which increased investment cost. In an emergency against USD, the decision must be made.
The habit of increasing BI rate each time Rupiah was depreciated against USD must be accompanied by a more creative policy like pulling USD possessed by Indonesia exporters which were being parked overseas and to draw export-based forex being parked in overseas banks. (SS)   

Business News - June 26,2013                       

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