Indonesia and the Global Crisis

Indonesia and the Global
Economy (in Crisis): Can
Indonesia be a Member of the
Global Elite?

Indonesia has a strategic position in the
global and regional economy

Indonesia is a member of the G 20 that can play important role in the common
effort to overcome the current global economic crisis and push for a reformation
of the world financial system.

Indonesia is the largest economy in Southeast Asia and has a leading role in the
effort to create ASEAN Economic Community in 2015 and develop cooperation
under ASEAN+3 and ASEAN+6 .

Under the current global economic crisis, Indonesia’s economy is projected to
grow moderately.

Indonesia is the third largest democratic country with a respected economic
performance.

Democracy works in Indonesia even though not yet deliver optimally.

However, Indonesia does not score well in terms of quality of the economy, such
as Human Development Index, Competitiveness, and governance.

There is possibility for Indonesia to go higher in in the rank of global economic
elite. However, there is also a danger that Indonesia could fall behind, as we
experience in the crisis of 1998, if we can not improve quality of development
significantly.

Policy Response

Place government funds at state-owned banks to increase liquidity in the banking system

Increase the amount of deposits guaranteed by the government in the banking system

Adjust the financial sector with prudential regulation (banks and the capital markets) as needed

Recognize the importance of monetary policy support, as deemed appropriate to domestic
conditions

Manage state-owned enterprises foreign exchange transactions to reduce speculation

Maintain a sufficient level of foreign exchange reserves through trade financing facilities, control of
consumption goods imports and illegal imports

Accelerate the disbursement of program loans for government and state-owned enterprise projects

Prepare crisis protocol (implementation of Committee of Financial Sector Stability)

Reduce government bond issuance in 2008 and 2009

Redefine emergency funding in State Budget Law 2009 based on emergency conditions for
anticipating of global crisis impact

Arrange standby financing facilities to support counter-cyclical measures and fiscal stimulus
package in 2009 Budget
Selected Actions Taken by the Government
High awareness and proactive management of the impact of the global financial crisis on Indonesia

Conclusions is,

Indonesia is in a god position to improve its standing in the global
economy.

Under the current global economic crisis Indonesia has a possibility to
be able to grow moderately.

Indonesia has to increase the contribution of export and FDI o growth.

Banking sector is in a good condition and should be able to play higher
role to support growth.

The challenge is to improve quality aspects of the economy so that it
could grow in a sustainable way.

As the largest economy in ASEAN, Indonesia can play a leading role in
the effort to create ASEAN economic community and develop
cooperation at the level of ASEAN+3 and ASEAN+6. This should not
allowed to set back even under the global economic crisis.

As the third largest democratic country, Indonesia should be able to
evolve as a reliable democratic country that able to deliver hiher level of
welfare to the people.


Summary of 2009 Budget

Macroeconomic assumptions used in the 2009 budget are optimistic despite having factored
in any potential downside risk

The budget assumes moderate tax revenue growth of 20% in 2009

Currently implementing the Income Tax Law, which will lower tariffs, increase minimum
thresholds and provide tax incentives to certain sectors and regions, in order to reduce costs
of businesses

Continue to improve transparency for the calculation of cost recovery and revenue from the
oil and gas sector

Priority is given to poverty alleviation and education (BLT, PKH, PMPH and BOS), health care
and infrastructure (road, bridge, airport and electricity) programs

Use all fiscal, trade and industry instruments to support the real sector, boost investment
climate and increase competitiveness of Indonesia’s economy

Increase fiscal contingency fund to fund the budget deficit

Shift financing sources from marketable securities to standby financing facilities from
bilateral and multilateral institutions

Arrange standby financing facilities to support counter-cyclical measures and fiscal stimulus
package in 2009 budget

Prepare crisis protocol through implementation of the Committee of Financial Sector Stability

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