Is the Indonesian
economy in trouble?
Suddenly there are signs of pressure in the Indonesia
economy. Until recently, the economy seemed to be doing well. But growth is now
slowing, inflation is rising, the balance of payments is under pressure, and
the value of the rupiah has slumped. Why the change in economic fortunes?
The latest developments in Indonesian markets reflect both long-term and short-term factors.
The longer-term factors include a range of issues which have
been a source of comment within Indonesia for some time. At the broadest level,
something of an inward-looking mood appears to have been influencing policies
during the past year or so. Senior policy makers have emphasised that the broad
approach being promoted, which is one of looking for ways to strengthen
Indonesian industries, is not protectionist. Policies of this kind, policy
makers argue, will strengthen the resilience of the Indonesian economy by
providing greater economic security which will shield both Indonesian producers
and consumers from the vagaries of uncertain international conditions.
There is much to be said for the long-term aim of building up
domestic Indonesian industries and emphasising key goals such as food and
energy security. But a number of well-publicised policies during the past few
years have been somewhat interventionist, and have arguably had an anti-market
flavour about them.
Policies in
the mining sector, for example, have not been especially successful in
promoting growth. Output has been falling steadily for over a decade in the oil
sector, a previous source of strong exports and government revenues during the
1980s and 1990s. Indonesia, formerly a significant oil-exporting nation, has
now become an oil importer and the rising levels of oil imports have become a
significant strain on the balance of payments.
In the non-oil mining sectors, investors view some key policy
approaches as being excessively interventionist. Mining firms in various
industries have been told to install smelters and to process their resources
before export. Government directives to this effect are expected to be
implemented regardless of whether additional processing in Indonesia is
profitable or not.
These directives, along with a range of other structural
policies in other sectors, appear to have had the unintended effect of holding back
the expansion of exports while adding to the national import bill.
In good times, when the international economy is strong and
when international financiers are keen to invest in emerging market economies,
developing countries such as Indonesia perhaps have room to take risks with
experimental structural policies. But when international conditions are more
difficult, markets and investors are less tolerant.
The short-term problem for Indonesia now is that markets have
suddenly turned less tolerant, due to three recent developments. First, the
slowdown of economic growth in China has led to a fall in demand for
Indonesia’s exports. Second, US Fed chairman Ben Bernanke’s indications that
the remarkable period of loose monetary policy in the US might be drawing to an
end has led to something of a global flight of capital from emerging markets.
And third, India’s current economic woes have
led to concerns that these problems might spread to other countries across the
region through a process of contagion, as was the case in the Asian Financial
Crisis of 1997–98.
But it is too early to see the current developments in Indonesian
markets as a threat to longer-term growth. For one, policy makers have
responded swiftly. On 23 August, Indonesia announced a package of comprehensive fiscal and
monetary policies as a response to the pressures in the financial and
trade markets. And, to strengthen the package, just a few days ago (29 August)
the central bank Bank Indonesia increased interest rates to 7 per cent.
For another, Indonesia has a very strong team of economic
policy makers. Vice President Boediono has many years of experience in both
monetary and fiscal policy matters, including during the Asian Financial
Crisis. He is supported by the Minister of Finance, Dr Chatib Basri, and the
Governor of Bank Indonesia, Agus Martowardojo, both of whom are known for their
firm commitment to sound economic policies.
Finally, some of the short-term pressures that Indonesia is
facing may even prove to be a blessing in disguise. The recent period of strong
growth during the past few years may have lulled some policy makers in
Indonesia into believing that economic success is guaranteed. If so, an
economic rap over the knuckles to remind them that international markets are
both fickle and powerful may be no bad thing.
Sumber :
5W + 1H
- What are the long-term economic problems and short-term happening in Indonesia?
Economic problems long
term and short term in indonesia is the inflow of cheap money from
overseas courtesy of the Fed monetary policy. And the growth in the commodity
demands from China, India and a few other countries.
- Why policy making affecting Indonesian economy in the long run?
Senior policy makers have
emphasised that the broad approach being promoted, which is one of looking for
ways to strengthen Indonesian industries, is not protectionist. Policies of
this kind, policy makers argue, will strengthen the resilience of the Indonesian
economy by providing greater economic security which will shield both
Indonesian producers and consumers from the vagaries of uncertain international
conditions.
- When Indonesia announced a package of fiscal and monetary policy as a comprehensive response to the pressure in financial markets and trade?
On 23 August, Indonesia
announced a package of comprehensive fiscal and monetary policies as a response
to the pressures in the financial and trade markets.
- Who have many years of experience in matters of monetary and fiscal policy, affairs, including during the Asian financial crisis?
Vice President Boediono
has many years of experience in both monetary and fiscal policy matters,
including during the Asian Financial Crisis.
- Where is the slowdown of economic growth which has led to a decline in demand for exports of Indonesia?
The slowdown of economic
growth in China has led to a fall in demand for Indonesia’s exports.
- How to cope with the economic problems that occur in indonesia?
It’s clear that the Indonesian authorities consider
the inflow and outflow of hot monies is a problem. But it is probably
manageable. The Indonesian authorities have (very wisely) allowed the forex
rate to depreciate considerably in recent months. This is a great help. It will
probably go a long way towards responding to the problem.
My comment :
I think all parties in the face of economic crisis Indonesia must
continue to foster a sense of optimism and work together so that it can
maintain public confidence. All the proper conduct and good communication on
society. Not only governments and businesses, as well as banking, the Head of
State is also looking at the role of the press in this case is very important
because it has access to the information society. All people are expected to
avoid underestimating attitude and ego problems.
Nama : Pungki Oktaviani
NPM : 16213948
Kelas : 1EA15
