President Joko Widodo had
underscored the importance of independent national economic strategy known as
Trisakti Economy or Berdikari Economy. The point was that the nation must
strive to the maximum to rely on domestic resources and minimize dependency on
import including there in overseas debt, Government or corporate.
Many stakeholders at home had stated their view point
that Indonesia bore a heavy burden of overseas debt willed to the nation by the
past Governments and it was evident that overseas debt from the era of the New
Order to the Reformation Era had been ineffective for solving economic problem.
Trying to solve development financing problem by borrowing overseas fund would
but make economic burden even heavier in time to come.
Reasonable because overseas debt would worsen Rupiah
vulnerability and weaken national fundamental economy sustainably. In other
words, as long as the Government still rely on overseas debt for financing development,
pressures on State Budget would remain heavy. This was related to obligation of
capital and interest payment of foreign debt each year.
Whats’s more, the most dangerous thing of dependency on
overseas debt was that Indonesia was getting more dependent on foreign power.
Be side the Rupiah depreciation factor, oil price increase factor had been
burden to APBN State Budget year after which made national economic condition
to weaken.
As increased subsidy for oil had always been covered with
overseas credit, automatically Rupiah slump multiplied the amount of foreign
debt. Evidently subsidy for energy and electricity in APBN State Budget 2014
soared up by Rp.44 trillion from Rp.44 trillion to become Rp.284 trillion
against the previous Rp.328 trillion.
Thank God the Jokowi administration tackled oil subsidy
problem wisely by increasing price of last. The step was probably unpopular but
it allowed more room for Government’s foscal and at the same time controlled
Government’s passion to borrow from overseas resources.
The Government was smart enough not to trapped in foreign
debt, so release of promissory notes was the wayout. Hence dependency on
foreign debt would be minimized and domestic investors would be given greater
role.
Release of promissory notes would protect the nation from
debt creisis the way it happened in Greece, Portugal, Spain, Italy and Northern
Ireland sometime ago. Such was a reflection of Government’s spirit to be
independent. It would be wrong step to keep relying on foreign debt amidst
export slowdown.
As known, Indonesia’s export performance had been low in
the part 2 years which made trade deficit to swell. Indonesia’s DSR increased
from 43% in 2013 to 46.16% in September 2014, signaling that Indonesia’s
fundamental economy was sensitive to global economic turbulence. DSR is total
debt installment plus interest divided by total export.
Debt Service Ratio [DSR] increased if debt increased and
income from export must be watched on. To improve DSR, export must be increased
for better income. It would be advisable for the Government to learn a lesson
from 1997.1998 crisis marked by increased overseas debt of the private sector.
So it was right if the Ministry of Trade and Ministry of
Industry joined forces to jack up export. It was said that the Government
planned to increase export up to 300% in the next 5 years. It was right if the
Ministry of Industry set forth a program called “Quick Wins Industry 2014 –
2019” consisting of seven points among others: re designing of Industrialization
Road Map by the spirit of Trisakti and Nawa Cita, downstreaming of agricultural
industry to agro industry, building 10 industrial estates outside Java through
collaboration of the Government and private sector.
Development of national economy must also consider
promotion of direct investment as propeller machine. In this case permit
application procedure must be made easy on one-stop service centralized at
BKPM.
In this case it was important to synergize 3 points
related to business permit i,e. formation of permit verification team, inter-ministerial
synergy and list up of prioritized business line in line with the development
system.
Specifically priority of permit would be given to
business lines to agriculture, maritime, energy [electricity] or labor
intensive industry which opened employment opportunities. Lastly to meet the
target of opening 2 million job opportunities per year.
Indonesia was now the most attractive investment
destination country when AEC would be in effect be early 2016. In the past 6
years Indonesia had been highly prospective for investors.
The Institute of Chartered Accountants in England and
Wales [ICAEW] noted that growth of capital inflow almost reach 45% in 2013. The
position was highest among other Southeast Asian states. The average growth of
capital income in ASEAN was around 15% - 20% in 2013.
Indonesia’s ranking position excelled above Thailand
since 2007. At that time growth of foreign investors in Indonesia stepped up
from 10% - 25% to over 30% in 2018 and 20%-40% in 2012 – 2013. On the country
in 2007 investment growth in Thailand shrunk by 22% down to 0% - 5% in 2013.
Indonesia ia still in Asean.
Increased capital inflow to Asean was chain effect of the
Fed’s action to run QE. However, after QE Asian countries including Indonesia
still had the advantage of having market integration.
According to the World Bank, Indonesia’s potential to
accommodate investment from the global market was still big. Unfortunately, the
investment could not be a perfect process because they increased import of raw
materials and spare parts. The ratio: for every USD 1 of investment there would
be increase of import of USD 34 cent.
One way to balance import was by promoting export.
Therefore Indonesia’s manufacturing industry must be export orientated. High
export volume would minimize deficit in current account.
In the future, Indonesia could no longer rely on minery
goods or commodities of vulnerable prices depending on global demand. Exported
manufacturing products now must be of added value to escape price reduction at
the international market. The potential export destination countries were among
others China, the USA, Europe and Japan. (SS)
Business News - December 12, 2015
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