Our economy shines<\/p>\n
The explosion of the US$450 million loan scandal at the state-
\nowned Bank Bapindo which jolted the financial sector early this
\nyear turned out to have only a little impact on the performance
\nof the Indonesian economy as a whole this year. The speed and the
\nway in which the monetary authority coped with the credit fiasco
\nnot only prevented a run on Bapindo but also succeeded in
\nmaintaining the public's trust in the banking system. The amount
\nof private savings raised by banks during the first 10 months of
\n1994 increased by 10 percent.<\/p>\n
The additional packages of reform measures launched in the
\nmiddle of the year further strengthened investor confidence in
\nthe long-term prospects of the economy. Indonesia's leading role
\nin hosting the Nov. 15 meeting of APEC economic leaders and
\nmotivating them to agree to adopt free and open trade and
\ninvestment in the Asia-Pacific region by the year 2020 served to
\nreassure domestic and foreign businessmen of the future direction
\nof the country's economy.<\/p>\n
All these developments got immediate, positive responses from
\nbusinessmen. Foreign investment commitments licensed this year
\nincreased by 195 percent to $23.7 billion and domestic investment
\nplans by 35 percent to Rp 53.3 trillion ($24.2 billion). More
\nforeign banks and major securities houses have become
\nincreasingly active. Total bank lending expanded by more than 18
\npercent. The Jakarta stock exchange got about 230 new share
\nlistings, thereby raising the market capitalization to Rp 105.2
\ntrillion or 30 percent of the gross domestic product. Around $4.7
\nbillion was raised through share and bond flotation during the
\nfirst eleven months of this year.<\/p>\n
The 30 percent rise in minimum wages this year and another 10
\npercent increase next year will hopefully strengthen good
\nindustrial relations and minimize the incidence of labor strikes,
\nwhich, given the high unemployment rate and widening gap between
\nthe very rich and the poor, could easily turn into acts of
\nvandalism and have far-reaching repercussions in relation to
\npolitical stability.<\/p>\n
The remarkable progress achieved in the privatization of such
\nbasic infrastructure as power generation and telecommunications
\nthis year is expected to further reduce the high-cost components
\nof the economy.<\/p>\n
The lower income tax rates to be introduced by the new tax
\nlaws next year have been praised as greatly conducive not only
\nfor stimulating new investments, but also for broadening the tax
\nbase. This is good news for the state budget because tax receipts
\nnow account for around 65 percent of total internal revenues for
\nthe government. Given this favorable condition, the average
\nannual increase of 20 percent in tax receipts over the past few
\nyears may well be within reach for the coming 1995\/1996 fiscal
\nyear beginning in April. As the international prices of oil,
\nwhich together with natural gas contribute about 25 percent of
\nthe government revenues, are projected minimally at a range of
\n$16 to $18 per barrel next year, the 1995\/1996 state budget can
\nmost likely be increased at least by 20 percent.<\/p>\n
Noting all those positive factors, no wonder most economists
\nestimate the economic growth at at least 6.7 percent this year
\nand predict another robust expansion of seven percent next year.
\nThe only caveat is inflationary pressure.<\/p>\n
That looks simple to deal with. But the success in curbing
\ninflation will determine bank interest rates, which in turn will
\ninfluence investment activities, and will determine the rate of
\nrupiah depreciation against major international currencies. And
\nin so far as Indonesia is concerned, the challenge is not small
\nat all because anti-inflation measures require not only careful
\nmonetary management, but also further deregulation measures to
\nimprove the overall efficiency of the economy. Further down the
\nline, that calls for further reduction of bureaucratic hurdles
\nand high tariff protection and improvement of the mechanism of
\nmarket competition.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/our-economy-shines-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}