New points in revised LoI
Ten economic recovery acceleration program
I: Creating stability in the financial sector
1. Strengthen the financial sector in order to improve the economic fundamentals. Improvement of indicators in the real sector should be followed by improvement of indicators in the financial sector.
2. Increase coordination and synchronization of fiscal and monetary policy between the Economic Team and Bank Indonesia (the Indonesian Central Bank).
3. Improve the trust and create positive expectation among the investors and the public at large towards the recovery of national economy.
II. Boost export increase
1. Utilize the excess capacity in the manufacturing industry sector to boost export.
2. Utilize the excess liquidity in the banking sector to boost credit lending, both for working capital credit as well as investment credit, for export-oriented activities.
3. Promote the creation of a competitive and hazard free business environment in order to boost export.
4. Utilize the momentum of a competitive Rupiah value in order to boost export.
III. Increase the Productivity and Welfare of Farmers
1. Conduct seed policy programs in order to boost productivity in the agriculture sector and increase the income of farmers. Through the seed policy, productivity could be increased in the same area of land.
2. Promote the mechanization process in Indonesia's agriculture sector, especially for area outside of Java, in order to increase agricultural productivity.
3. Choose the top 20 agricultural commodities to be intensively developed in order to be competitive in the domestic as well as international market.
4. Promote processing industries in order to increase the quality and added value of agricultural products, especially post- harvesting processing.
5. Promote the development and use of technology in order to increase agricultural productivity.
IV: Acceleration of banking and private sector restructuring
1. Conduct internal restructuring, both to the management and business, for the re-capitalized banks in order to be healthier, more prudent, competitive and profitable.
2. Promote the establishment of a consolidated national banking structure, but not concentrated through merger and acquisition among banks.
3. Persuade banks to provide bigger credit allocation for small and medium scale businesses as an effort to improve the loan portfolio quality of the banking sector.
4. Apply a more profitable exit strategy for the government, in selling the assets of the banking sector.
V: Prioritize on equity-based recovery instead of loan-based recovery
1. Increase the support from multilateral organizations, such as the IMF, World Bank, Asian Development Bank, OECD, Islamic Development Bank, etc.
2. In order to accelerate Indonesia's economic recovery and create millions of job opportunities, the government should support infrastructure projects with the following criteria:
2.1. It should create many job opportunities, whether directly or indirectly.
2.2. It should promote the development of economy in the respective region.
2.3. It should create maximum economic benefit to the local community near the infrastructure project.
2.4. It should be feasible both economically and financially, in order to attract domestic and foreign investors.
3. In order to finance the infrastructure projects, the government should emphasize on the participation of domestic and foreign investors by maximizing the leverage from multilateral loans or G-to-G. It is expected that infrastructure projects in the area of Gus Dur-Megawati should be cheaper comparing to the New Order Era due to the decrease in KKN (collusion, corruption, and nepotism).
VI. Value-creation privatization
1. Avoid fire-sales of assets belonging to SOEs and IBRA by creating an added value before privatization is conducted through business as well as financial restructuring.
2. Value-creation privatization will be conducted for sectors that has appeal to foreign investors, such as telecommunications, transportation, estate crops, hotel and tourism, infrastructure, as well as oil and gas.
3. The government should promote foreign parties to be majority shareholders as secondary operators through an open, fair and transparent tender process. With the increasing number of foreign parties as majority shareholder, the secondary operators could attract foreign loans with competitive interest rates in order to increase additional investment. The majority shareholder of prime operators should be in the hands of the government.
4. Try to maintain the government's long-term buy-back share option.
5. The government should promote to the people to own shares of SOEs, either through the capital market or in form of unit trusts.
VII.Conduct economic decentralization
1. Apply Law No.22/1999 and No.25/1999, especially in aspects that deal with economic decentralization. The decentralization process should be conducted in stages in order to maintain macro and fiscal balance between the central and local government.
2. Promote the implementation of economic decentralization in the local level, namely in areas of basic infrastructure development, such as hospitals, schools, etc.
3 Boost economic development in the regions through trade and investment cooperation between areas and regions.
VIII: Utilize the natural resource endowment
1. Promote the optimum utilization of maritime resources by taking into consideration the principles of sustainability and environmental safeguards.
2. Promote reform in the maritime sector and provide attractive incentives for the participation of the private sector, both domestic and foreign, in order to maximize the state revenue from the maritime sector.
3. Participation of the traditional fishermen in the utilization of maritime sector is a must, through the modernization of fish catching equipment.
4. Conduct gradual liberalization in the oil sector, especially in the downstream industry. Through this strategy, it is expected that efficiency in processing, distribution and marketing in the oil sector could increase, therefore increasing the government's revenue.
5. Provide incentive in the upstream industry from the oil and gas sector in order to attract investor in increasing the supply of oil and gas.
6. Conduct domestic gas policy to increase the domestic use of natural gas in order to minimize the energy sector cost for industries and households. This policy would minimize the domestic use of oil, therefore increasing the proportion of oil to be exported which automatically increase the government's revenue.
IX: Boost the development of micro, small and medium scale businesses
1. Increase the credit allocation for micro, small, and medium scale entrepreneurs through experienced and reputable financial institutions in managing micro, small and medium scale credits.
2. Increase the incentive for financial institutions, in form of administrative subsidies and technical supports for micro, small and medium scale businesses.
3. Promote the development of primary products in the existing productions centers by providing financial and non-financial support.
4. Promote the integration, modernization, and credit expansion to traditional financial institutions.
5. Provide tax incentive, administrative ease and support the establishment of a competitive business climate in order to increase productivity of small and medium scale enterprises.
6. Conduct revision towards financing schemes of micro, small and medium scale businesses.
X: Increase the people's welfare in the rural areas in order to strengthen socio-political stability
1. Increase the level of real rural wages by improving the terms of trade for agricultural commodities.
2. Accelerate infrastructure projects in the district (kecamatan) and rural sub-district (pedesaan) level, such as tertiary irrigation, rural roads, etc. as part of the strategy to increase real rural wages. The government is planning to increase the volume of this program comparing to the previous years.