GOVT CONSIDERING LOWERING FUEL OIL PRICES

By Andi Abdussalam

Jakarta, Oct 27 (ANTARA) - When  crude prices in the world market were hovering at US$120 a barrel in  May this year, causing fear that it would push up fuel subsidy to more than Rp125 trillion, the government was prompted to raise domestic fuel oil prices by an average of 28.7 percent.

        The government raised the prices of premium gasoline from Rp4,500 to Rp6,000 per liter, diesel oil from Rp4,300 to Rp5,500 per liter and kerosene from Rp2,000 to Rp2,500 per liter.

         With the fuel oil price hikes, the government was said to be able to save up to Rp25.877 trillion in fuel oil subsidy from the state budget.

         Now that crude price in the world market has dropped to US$70 per barrel, Energy and Mineral Resources Minister Purnomo Yusgiantoro said his side would have a coordination meeting with the finance minister to discuss the downward trend of crude price in the world market.

         The point is that the government is considering to lower domestic fuel oil prices. The same opinion was also expressed by State Minister for National Development Planning/Chairman of National Development Planning Board (Bappenas) Paskah Suzetta.

         He said that the government is planning to lower fuel oil prices early next year in line with the down-ward trend in crude prices in the world market,
    "The government will hold a meeting with a number of ministers next week to discuss the plan to lower fuel oil prices," Suzetta said after attending the 44th anniversary celebration of Golkar Party here on Sunday.

         He said that the government should pay attention to two things before deciding to lower fuel oil prices, namely fuel oil subsidy and the fluctuating rupiah exchange rate against the US dollar.

         The minister said that although crude price in the world market had been going down, the government would continue its cash assistance (BLT) for the poor until next year.

         Minister Yusgiantoro said that whether or not  fuel oil prices needed to be lowered it must be discussed in a coordination meeting of the cabinet ministers.

         "The policy to raise or lower the prices of fuel oils is not the sole affair of the Ministry of Energy and Mineral Resources (ESDM). It needs coordination with the finance minister and other cabinet ministers and then report the result to the president," Yusgiantoro said.

         The minister was confident that if the decision is taken jointly it would serve the best interest of the people, and therefore the government will surely prepare a best decision.

           According to the minister, the technical departments and the ESDM now keep on monitoring the developments of fuel prices in order to study at what point the prices could be set, whether it would be set at the same levels as now for example,  premium gasoline at Rp6,000 per liter, diesel oil at Rp5,500 per liter and kerosene at Rp2,500 per liter.

          He said that the present prices were actually the same  as that of retail prices. The retail prices were equivalent to several US dollars per liter.        
     "We are calculating how much the exact price of the Indonesian Crude Price (ICP) and how much subsidy is still needed. Our idea is that there would be no longer a subsidy. This is our first idea," he said.

          Yusgiantoro said that the second thing is that the government was taking into account when the prices were lowered but it turned out later that fuel oil prices rebounded, the consequence was that the prices would go up  again.

          "The prices would be raised again, though it would unlikely be the same as the present level," he added.

         That's why in the near future, the relevant ministers will hold a coordination meeting to see whether the prices will also be raised if the price of   crude price in the world market increased. The technical department is still discussing it before it was taken to a cabinet ministers' meeting.

          Yusgiantoro said that the government was also studying the implications that would arise if the fuel oil prices reduced. "The logic is that the subsidy will decline if the fuel oil prices also decrease," the minister added.

         However, the minister reminded that the state income from this sector would also drop while revenues from the ESDM accounted for 35 percent, of which oil and gas contributed some 25 to 30 percent.

         He said that based on his office monitoring, when OPEC cut its production by 1.5 million barrels per day it was expected that the price would rise to US$80 per barrel but it seemed that the price did not increase but adversely still went down.

         "That's why we are still waiting for the market response.   This is because the price of oil is difficult to predict," the minister said.

         However, the minister said he was convinced the government would come up later with a decision, which was not made by the ESDM alone but the government one.

(T.A014/A/HNG/a014)  27-10-2008 01:00:30

INDONESIA TRYING TO SAVE AILING INDOVER BANK

By Andi Abdussalam

     Jakarta, Oct 26 (ANTARA) - While calls for investigation into possible irregularities in the Netherlands-based Indonesische Overseas Bank (Indonver) are being raised, the Indonesian government is seeking a 546 million euro bailout for the ailing Bank Indonesia (BI) subsidiary.

        A court of law in the Netherlands had since October 7 frozen Indover Bank's operations. The Indover Bank's operations were frozen by the court after the bank failed to honor obligations worth US$92 million.

        The freeze was imposed following liquidity problems facing the bank after a turmoil struck  the money market as a result of the global financial crisis.

       Apart from the financial crisis, however, a legislator of the Democrat Party, Vera Febyanti, suspected that the irregularities had caused a problem to the bank, calling for an investigation of Indover for an alleged financial scam that had brought it to the brink of bankruptcy.

         "Indover must be investigated because many irregularities and instances of embezzlement with legal implications have happened in its operations. Criminal acts have been committed," Very Febyanti said on the sidelines of a working meeting of the House of Representatives (DPR), BI and the government this week.

         Bank Indonesia Governor Boediono agreed that an investigation  on Indover Bank should be conducted to uncover financial irregularities in the ailing bank.

         "We don't the investigation, because it needs to be conducted," Boediono said after a closed-door meeting with  Commission XI of the House of Representatives (DPR) at Parliament Building.

         "The details of the investigation can be determined later on. The most important thing now is that DPR has agreed to the bailout (to rescue Indover)," he said.

         The government hoped that the central bank's subsidiary in the Netherlands would be salvaged from bankruptcy.

         After a two-hour closed-door meeting with Bank Indonesia (BI) Governor Boediono and Finance Minister Sri Mulyani, the House of Representatives eventually agreed to channel a 546 million euro bailout or about RP7 trillion to save Indover Bank.

         "The presence of Indover Bank should be maintained because it  may cause a systemic impact if liquidated. But we still ask for an investigation into the bank in case of it had  violated the law," a member of the House's Commission XI which deals with financial affairs, Awal Kusumah, said.

         Awal said the approval was okayed after making various considerations which were not merely for the sake of Indover Bank, but in a broader scale for the national economy as well.  
    BI Governor Boediono after the meeting told the press that he warmly welcomed the decision of the House's commission XI. Should Indover Bank be liquidated, it will cause a negative impact on the national economy especially its financial sector.

         In the meantime, Vice President Jusuf Kalla hailed the decision to provide a bailout of Rp7 trillion for Indover Bank, saying it was made in the framework of saving state assets.

        "Indover Bank belongs to Bank Indonesia (BI), which means that it is state money. If the bank is declared bankrupt it means not saving state assets. So the move is aimed at saving state assets," he said after a Friday prayer.

         The vice president firmly said that the bailout fund must be provided through the existing mechanism and regulations.

         "Basically we agree to bailout Indover Bank, but those who have made a mistake would still be examined," he said.

         Boediono said if Indover Bank was not saved it would affect the national economy especially the financial sector. It among other things could disrupt the flow of funds to the country and affect transactions such as exports and imports causing a tight monetary situation and others that would in turn hinder real sector development.

          He assured he would adhere to all the relevant laws in his efforts of saving Indover Bank including investigating possible violations of banking practices that had led to the bailout.

          An approval was needed from the House of Representatives because Bank Indonesia as the shareholder could not just give the funds to the bank just like that.

          Article 77 of Law Number 33 of 1999 that has been revised into Law Number 3 of 2004 on Bank Indonesia, states Bank Indonesia has to divest Indover Bank.

          A curator appointed by Bank Indonesia is currently handling the settlement of Indover bank problems and in carrying out its task  fully adhering to the rules the Netherlands.

          In the meantime, the Attorney General's Office (AGO) said it was facing difficulties in carrying out an investigation into the Indover case due to the differences between Indonesian and the Netherlands legal systems.

          "After we studied the case, we drew a conclusion that we are facing difficulties in bringing the suspect, SST, to counrt based on  double criminality as stated in point 5, article 1 of the Criminal Code," said Attorney General's spokeman Jasman Panjaitan over the weekend.

          He said that the difficulty in bringing SST, the suspect, to court was due to the differences between the Indonesian and  Netherlands legal systems.

          Panjaiitan said that in the Netherlands legal system, the SST act is not a crime.

          "But the attorney general has ordered the investigation of the case," he added.

(T.A014/A/HNG/a014)  26-10-2008 22:26:44

BALI BOMBERS TO BE EXECUTED EARLY NOVEMBER

By Andi Abdussalam

       Jakarta, Oct 24 (ANTARA) - The Attorney General's Office (AGO) statement on Friday that the Bali bombers on death row Amrozi, Ali Gufron or Mukhlas and Imam Samudra would be executed early next month, did not surprise many.

         The AGO might be serious in its statement and execution of Amrozi et al might really be carried out soon.  Yet, it is still fresh in the public's mind when last July Attorney General Hendarman Supandji stated that the Bali bombers were to be executed before the fasting month (September). But it was not carried out.

         Hence, today's statement by the AGO official that Amrozi and friends would face a firing squad soon remains to be seen. After all, AGO spokesman Jasam Pandjaitan did not refer to any specific date or day of the execution.

         "Convicted Bali I bombers Amrozi et al will be executed  early next November," Jasam Pandjaitan said.

         The death-row convicts Amrozi, Mukhlas and Imam Samudra  had pursued the last available legal avenue unsuccessfully and  the result of the process has become legally binding.

         "The three did not apply for pardon,  so the execution can be carried out soon," he said, adding that "Their execution will be carried out early in November."
     Panjaitan read to the press on Friday the decision to execute the Bali bombers but he did not mention any day or date for the execution. The press was also not given a chance to raise questions about the matter.

         Amrozi and his two associates were sentenced to death for their role in the Bali I bombings in 2002 which killed, among others,  88 Australians.

        The three had filed a judicial review with the Constitutional Court (MK) on the law they believed that execution by firing squad as mandated  by Law No. 2/PNPS/1964 was against their constitutional rights of not to be tortured.

        However, the Constitutional Court (MK) recently turned down their request for a judicial review on Law No.2/PNPS/1964 on the Procedures of an Execution.

         Therefore, House of Representatives (DPR) Speaker Agung Laksono had asked the Attorney General not to further delay  the execution.

         "I regret the postponement (of the execution) without clear ground. Just execute (them)," Laksono said at the Parliament Building here on Friday.

         Laksono said if there was no more legal attempts of the condemned men, they should be executed. It was not necessary to postpone the execution further, he said.

         Vice President Jusuf Kalla has said the execution of Amrozi et al was a matter of choosing the right time.

         "Executions are always carried out following extensive  considerations and at the right time. It does not mean that the government hesitates to carry out the death penalty," the vice president said.

          The vice president said  Sumiarsih, a woman who was convicted of killing a National Defense Forces (TNI) soldier, was executed  20 years after she was condemned to death.

          That's why the government hopes the world community will give a proportional reaction to the country's decision to execute the Bali bombing death-row convicts Amrozi and friends.

        "As we have seen,  the country's legal process in  this case has been quite transparent and covered a long time. We hope the world community will give  proportional reactions to the decision to execute  Amrozi et al," Foreign Ministry spokesman Teuku Faizasyah said here on Friday.

        Faizasyah said the government had never interfered in the legal proceedings of Amrozi and his two associates, Mukhlas and Imam Samudra.

        "Everything was left to the judicial authorities alone. The government never interfered in the case. It never asked the judicial bodies to expedite or slow down the legal process," he said.

        In general, the world community had been divided into two groups in regard to the Bali bombers case, he noted. One group wanted their execution expedited and the other was opposed to the death penalty.

        On the Australian government's reactions to Amrozi et al's execution, he said Canberra respected the law in Indonesia.

         The execution of the three Bali bombers is being eagerly awaited by the Australian public, especially by those who survived the carnage or lost their loved ones in the terrorist attack in which 99 Australians lost their lives.

         Their waiting  for the execution of the death row convicts for over six years was covered by many Australian print and electronic media on Friday.  
    Erik de Hart who survived the 2002 carnage told   Channel Seven TV station on Friday morning he agreed that the trio should face a firing squad.        
    The same feeling was expressed by Chris Wallace who lost a sister, Jodi, in the terrorist attack which took the lives of a total of 202 people.        
    Wallace was quoted by the Daily Telegraph as saying he would like to witness the execution of the men who were responsible for his sister's  death.      
    "I felt a little bit frustrated (with the delays in their execution), because the delay  lasted many months. Several times it was reported they were about to be executed, and each time it was delayed.  I asked the Federal Police by phone whether I could go and personally witness their execution," he said.      
    In Semarang police said on Thursday they had prepared three firing squads for Amrozi et al who are being held in a maximum security prison on Nusakambangan island, off Central Java's southern coast.

         "A squad for each convict," Central Java Police Chief Inspector General FX Sunarno said.

         Under Law No 2/PnPs/1964, one convict will have a 12-member firing squad.

         Therefore, Sunarno said, there would be 36 police officers for the execution of the three convicts, in addition to one commander for each squad. (t.A014/A/HNG/a014) 24-10-2008 23:44:03

GOVT TO PROTECT BANK CUSTOMERS' MONEY AMID FINANCIAL CRISIS

By Andi Abdussalam
     Jakarta, Oct 11 (ANTARA) - The House of Representatives (DPR) and the government have been holding intensive consultations this week to discuss anticipatory measures in the face of the on-going global financial crisis that have forced the Indonesian Stock Exchange (BEI) to close its trading activities since Wednesday.
     Among the issues the DPR and the government had discussed was how to protect bank customers' money and to prevent a rush that could plunge banks into a deep crisis like the one in the 1997 financial meltdown.
     The consultations were made following calls by Bank Indonesia (BI/the central bank) and a political party to provide a security guarantee for about 77 million accounts with a total deposit of about Rp1,350 trillion in the country.
     "The government has submitted a draft regulation in lieu of law (Perpu) to the House of Representatives (DPR) that would make the government, Bank Indonesia and Savings Guarantor Institution (LPS) able to react and respond to problems that may arise in a situation like in the current crisis," Finance Minister Sri Mulyani said.
     On Friday, the minister met with House Speaker Agung Laksono. In the 45-minute closed-door meeting, the minister discussed the issuance of a Perpu on efforts to anticipate a worsening of the global crisis.
     Earlier, the National Mandate Party (PAN) called on the government to provide a security guarantee for about 77 million deposit accounts by raising the upper limit of amount of funds in banks which would receive a security guarantee from Rp100 million to Rp2.5 billion per account.
     "There are about 77 million deposit accounts in the country, including that of the Indonesian Retailers Bond (ORI)," PAN Secretary General, who is also PAN faction chairman in the House of Representatives (DPR), Zulkifli Hasan, said.
     He said that based on PAN studies, about 90 percent of the 77 million accounts belonged to depositors with deposit money less than Rp2.5 billion each.
     He said that account owners who were generally individuals had begun to become anxious because the government had not yet taken a firm step in providing a security guarantee and protection for their money.
     The Savings Guarantor Institution (LPS) has so far provided a security guarantee for a maximum deposit of Rp100 million for each bank customer, while the guarantee interest rate was 9.25 percent.
     Bank Indonesia acknowledged that the upper limit of bank customers' funds that should be guaranteed should be increased in order to provide certainty for bank customers amid the global financial crisis.
     "We are now considering it because several countries have raised their guarantee funds such as Britain from 35,000 pounds sterling to 50,000 pounds sterling for individual customers and up to 100,000 pounds sterling for companies," BI Senior Deputy Governor Miranda Gultom said.
     She said in the current global financial crisis almost all countries had adopted various polices to temporarily ease liquidity restrictions in order to restore the public's confidence.
     "Thus, the public will feel secure about their funds as banks have a guarantee. We have made preparations for raising the amount of guarantee funds," she added.
     On the upper limit of deposits that would be given security guarantee, Finance Minister Mulyani said it would be decided after the issuance of the government regulation in lieu of law on the current financial crisis.
     She said the government along with Bank Indonesia, the LPS and the Forum for Stabilization of Financial Sector (FSKK) and the Capital Market and Financial Institution Supervisory Board (Bapepm-LK) were just evaluating various legislations needing a revision  to adjust with the current crisis.
     The Perpu would contain provisions linked to mechanism for and amount of guarantee on deposits, BI mechanism and criteria as well as requirements for supporting liquidity in the banking sector including the financial sector safety net.
     In order to reduce uncertainty and to prevent panic among the public, the central bank is also cooperating with the Ministry of Finance in maintaining the stability of the country's financial system by relaxing the minimum reserves requirement (GWM) and providing funds for bank reproduction.
     The LPS chief executive, Firdaus Djaelani, meanwhile said that his side could not determine the amount of deposit to be guaranteed as it would be determined by the government.
     "It is not impossible to raise the amount of deposit to be guaranteed by 100 percent in a situation like in the current crisis to maintain public confidence and to avoid a rush, and later lower it in stages after the situation becomes normal again," he said.
     Although no sign of a rush has been seen the LPS has caught the presence of fear for possible shifting of funds from small to big banks.
     "And therefore they have offered high interest rates and better services," he said.
     Worries about savings at banks began rising on Wednesday when trading on the Indonesian Stock Exchange was suspended as the market became irrational causing the main index to plummet more than 10 percent.
     The BEI authority decided to shut share trading because the composite index had tumbled to 168.052 points or 10.38 percent to the level of 1,451,669 or the lowest level since September 2006.
     Thursday through Friday and Saturday trading remained closed after the Dow Jones index at the New York Stock Exchange had dropped 678.91 points to 8,579.19 points, or to the lowest level since 2003.
     The BEI is likely to resume trading activities on Monday (Oct. 13) after the government has prepared the necessary infrastructure, the bourse's chief, Erry Firmansyah, said.
     "We will see (how things develop). God Willing, we will reopen the market on Monday, while the government is preparing all needed infrastructure today (Friday)," he added. (T.A014/A/HAJM/B003)11-10-2008 19:24:09

GOVT CALLS FOR BUYBACKS OF STOCKS TO RESTORE CONFIDENCE

By Andi Abdussalam

         Jakarta, Oct 9 (ANTARA) - The Indonesian government has called on state-owned enterprises (SOEs) to buy back their shares in an effort to restore public confidence in the Indonesian Stock Exchange (BEI) where trading  was suspended for two days (Wednesday and Thursday) as a result of the impact of the global financial crisis.

         Besides calling for the SOEs to buy back their shares at BEI, the government also asked the stock market authority to revise regulations in order to ease the buy-back process.

         State Enterprises Minister Sofyan Djalil said all state and public companies in possession of adequate funds had been asked to buy back their shares in the stock market.

         "The funds for the buybacks should come from the companies' internal sources. They can buy back more than 10 percent but less than 100 percent (of their shares)," he said.

         The minister made the remark after a meeting with President Yudhoyono at the Presidential office in the wee hours on Thursday to discuss the temporary suspension of trading at the Indonesian stock market.

         Trading on the Indonesian Stock Exchange was suspended on Wednesday and Thursday as the market became irrational causing the main index to plummet more than 10 percent by mid-morning on Wednesday.

         Sofyan said that SOEs which were instructed to buy back their shares in the stock market included PT Semen Gresik, PT Bukit Asam, PT Timah, PT Aneka Tambang and PT Perusahaan Negara (PGN).

         "PT Telkom has implemented the program," the minister said.

         He said that in order to carry out the buy-back program, his ministry would coordinate with the Capital Market Supervisory Board (Bapepam).

         The coordination is intended to allow Bapepam to ease its regulation and shorten the issuance of a license for a buy-back from 30 days to seven days.

         "We will discuss it so that Bapepam would draw up a special rule which will allow an extra-ordinary shareholders' meeting to be held without the need to wait for 30 days," he added.

         In the meeting which was also attended by executives of SOEs and Bank Indonesia (BI/the central bank), the president also asked all SOEs to carry out financial sector policies based on programs laid down by the government.

         "Thus, SOEs will  not conduct speculative foreign exchange buying because to buy one they have to coordinate with BI and the state enterprises ministry," Sofyan said.

         Head of the Capital Market - Financial Institutions Supervisory Board (Bapepam-LK), Darmin Nasution, meanwhile said his institution would also revise regulations which were related to share buybacks on the stock market.

         "The buyback regulation will be slackened, for example, a buy-back plan could be carried out without the need to pass through a shareholders' general meeting. The percentage restriction on the number of shares that could be bought back will also be revised," Darmin said.

         In the meantime, BEI President Director Erry Firmansyah who was also present at the meeting said that his side would revise a number of regulations in an effort to provide spacious rooms for market players to carry out better transactions.

         The same matters were also raised by head of Bapepam-LK's Bureau of Law and Legislation Robinson Simbolon. He said that his side would ease a number of regulations on stocks market.

         He said that the restriction where issuers could only buy back 10 percent of their shares was likely to be revised. Its percentage would be increased. But he did not mention how many percent.

         "The number of shares which can be bought back initially was 10 percent but we will increase it. It's still being worked out and will be announced later," he said.

          He said the volume of shares that can be bought back would be up to 50 percent.

         The buyback process would be shortened to seven days and company managements can carry out buybacks without first seeking the approval of shareholders' meetings but must make disclosures later, he said.

         The regulation would be effective as soon as trading at the Indonesian Stock Exchange is resumed,  he said.

         Market players have positively responded to the plan of SOEs and public companies to buy back their shares in the stock market.

         Investors have raised concern about the uncertain conditions of the stock market, fearing that the value of their portfolio investments would drop, thus bringing losses to them.

         Yet, the plan of state and public companies to buy back their shares has reduced the investors' concern.

         "In the current unclear economic conditions, buybacks are needed to maintain the interest of investors. With the easing of regulations on stocks market, we hope that issuers, including SOEs would soon buy back their shares in the market," President Director of publicly listed state-owned gas distribution PT Perusahaan Gas Negara Tbk (PGAS), Hendy P. Santoso, said. (T.A014/A/HAJM/20:05/H-YH) 09-10-2008 21:12:39

RI MUST BRACE ITSELF FOR GLOBAL ECONOMIC RECESSION

By Andi Abdussalam
    

Jakarta, oct 5 (ANTARA) - As the current global economic turmoil can no longer be responded to with conventional ways, Indonesia must face it by taking concrete and substantial steps such as diversification of export destinations, strengthening the domestic market and reinforcing the agricultural bases in rural areas.
     "The US$700 billion bailout fund for the collapsed financial institutions will not automatically overcome the global economic turbulence. To take an example, one can see a sharp fall in the United States stock market eventhough  US President George W Bush has signed the bailout bill," economic analyst Sutrisno Iwantono said on Sunday.
     Thus, the government needs to take immediate steps to salvage the national economy. Indonesia's exports, particularly agricultural products which depend largely on the United States and Japanese markets, will be hard hit.
     Besides, the global economic turbulence will also affect Indonesia's economic growth.
     State Minister for National Development Planning / Chairman of National Development Planning Board (Bappenas) predicted that the U.S. financial crisis would affect economic growth in Asia, including Indonesia.
     "It will weaken economic growth, particularly in Asia. We have to keep an eye on it because we will be forced to re-direct our exports to other destinations, possibly the Middle East," Paskah said.
     He said that Indonesia had to keep an eye on the crisis particularly its impact on Indonesia's exports to the United States.
     It was expected that Indonesia's exports to the United States would drop in the wake of the financial crisis.
     "We have to be watchful of what is going on there despite the fact that our exports to that country account for only about 30 percent," Paskah said.
      Therefore, according to Iwantono, the government must hear suggestions on the need to diversify export destinations so that dependence on the two countries could be reduced. The government should seek markets in the Middle East, West and Eastern Europe, China and India.
     "China and India are two increasingly important countries but the Middle East and Europe are equally important," Iwantono who is also chairman of the Indonesian Farmers Association (HKTI) and the Farmers Advocacy Center, said.
     He said that the trade minister should soon formulate steps to find market breakthroughs in these potential countries.
     Besides, Indonesia should not also fully depend on the global market because it could  collapse any time. Exports must be balanced with domestic orientation. "Thus, efforts to strengthen the domestic market are crucial," Iwantono said.
     Indonesia is different from Singapore and Taiwan whose size is much smaller and who fully depend on global markets for their exports.
     "With a population of approximately 210 million, Indonesia has highly domestic market potentials. Unluckily, the people's purchasing power is low," he said.
     The breakthrough that should therefore be made is to increase the people's purchasing power, particularly that in rural areas and the agricultural sector.
     The development of agricultural-based rural industries should be given priorities. The steps that could be taken immediately  include that the developing industries which provide the needs of their people, downsizing the volumes of competitive imported goods (against local products such as goods from China) providing product-processing facilities and ample access to credit facilities.
     Besides, the government should provide simplified licensing procedures for small-scale businesses/cooperatives, provide pro-the-poor allocation of development funds and slacken banking liquidity.
     According to Iwantono, several industrial sectors such as food, food processing, fisheries and fish-processed products, animal husbandry products and their processing facilities, timber and its processing as well as plantation products should be given  special attention.
     Iwantono said that investment flow would be very tight this year so that the investment climate must be improved. "Global investment will decline by 10 percent from US$1.8 trillion last year to US$1.6 trillion in 2008," he said.
     He said that as an investment destination country in Asia, Indonesia was a less interesting place than China, India and Vietnam.
     Though it has improved its investment climate, investors still complained about several factors such as the lack of  infrastructure, non-transparent legal process, complicated taxation rules, equity restriction, complicated administrative and bureaucratic procedures, difficulties in obtaining sub-contract businesses, labor disputes and shortage of skilled personnel.
     "The government needs to take comprehensive steps in these aspects," he said.
     In the meantime, Finance Minister Sri Mulyani Indrawati said the government would take  necessary steps to improve various regulations which hampered the development of the industrial sector.
    "We should continue making safeguarding efforts," Sri Mulyani who is also coordinator minister for economic affairs, said.
     The government is keeping a watchful eye on the possible flow into Indonesia of goods failing to enter the United States as it has the potential to disrupt their industry, she said.
     "We have warned the Customs and Excise Authorities of the possibility of goods which are diverted to Indonesia because they failed to enter the United States. We have to anticipate that," Finance Minister Sri Mulyani said here on Sunday.
     The declining demand for imported commodities from the United States as a result of the financial crisis in that country would surely affect the export performance of other countries, including Indonesia.
     Therefore, the government would take anticipatory steps on the possibility of the decline in national productivity as a result of the decline in demands for export goods.
(T.A014/HNG/A/H-YH)  October 5, 2008

INDONESIAN GOVT ALERTED OVER U.S. FINANCIAL CRISIS

By Andi Abdussalam
     Jakarta, Oct 5 (ANTARA) - Observers have warned the government to assure the public of its economic resilience against possible impact of global economic turmoil as a result of the collapse in a number of the United States financial institutions.
     "The government should keep an eye on the US financial turbulence. It could affect Indonesia's market in the future if the US government failed to secure approval from the US Congress of its financial bailout package," Eric Sugandi, an economist at Standard Chartered, said.
      The Indonesian market and banking system might not be affected immediately  if the Congress rejected its government's proposal to use US$700 billion of taxpayers' money  to bail out collapsed financial institutions. But in the long run, they might
     "Rejection by the US Congress of the bailout plan will cause a more violent  economic turbulence, the impact of which will be felt by a number of countries in Asia and Europe," Eric Sugandi said.
      According to Sugandi, the government should keep an eye on the global economic turmoil because it was feared fund managers would take anticipatory steps to avoid further losses.
      Fund managers would likely transfer and invest their funds in commodity markets such as crude, coal and gold and this  in turn would lead to other problems.
      With fund managers entering the oil market, the crude price which at present was recorded at US$100 a barrel, would strengthen, he said.
      He said a US Congress rejection of the bailout plan would create a worse economic turmoil as a number of regional stock markets, including that of Indonesia, would be hit.
      The Indonesian central bank (Bank Indonesia/BI) will be required to provide incentives if the  stock market at home is affected. BI was previously expected to raise its benchmark rate to help ease tight liquidity at home but because of the US financial crisis, it should not do so.
      Economic observer Tony A Prasetyantono of BNI bank said he believed BI will maintain its benchmark rate at 9.25 percent due to the financial crisis in the United States.
      He said he initially thought that BI needed to increase its rate because liquidity in the market was relatively tight. Amid the US financial crisis, however, the BI rate needed to be lowered to provide the capital market with incentives.
     "So, there is a tug-of-war between the need to raise the BI rate and the need to lower it," he said adding that  On the one hand, BI needed to raise its rate to respond to the tight liquidity but on the other,  it  had to lower the rate to prevent the stock market from being affected by the US financial crisis.
      Besides having a possible effect on the domestic stock market, the financial turmoil could also have a  psychological impact on bank customers in prompting them to rush the banks.
      Therefore, the Indonesian Chamber of Commerce and Industry (Kadin) called on the government to provide the public with accurate  information on the country's economic resilience so that the US financial crisis would not have an adverse psychological impact on domestic bank customers.
       "Basically, the impact of the United States financial crisis on us is insignificant. But we need to prevent depositors at home from rushing the banks such as has happened in the US, China and Hong Kong," Bambang Soesatyo, chairman of Kadin's Permanent Committee for Monetary and Fiscal Affairs, said on Friday.
        He said the monetary crisis in 1998 peaked when depositors rushed the banks, which was a deadly attack on national banks which forced the monetary authorities to save the banking system by issuing a monetary instrument called Bank Indonesia Liquidity Assistance (BLBI).
       He said in a situation like now, bank customers needed information on the country's economic resilience, such as foreign exchange reserves and banks' ability to provide funds for public fund withdrawals.
      Bambang said each bank usually had main customers who had to be informed that their money remained safe in the bank because Indonesia did not experience a situation like that in the United States now.
      "The most important thing is that banks' liquidity must remain secure. No matter how much money the depositors want  to withdraw, banks should be able to meet  demand," he said adding that in the present situation banks should not create the impression that they were facing a liquidity problem because that would create very dangerous rumors.
      "So, in the present situation, the most important thing is to protect the banking system. The public must be convinced that their money in the bank remains safe so that a rush can be prevented," Bambang said.
      Apart from that, according to Bambang, Indonesia's exports were also likely to be affected. Global market demand for Indonesian goods would drop  as a result  of  the United States' financial crisis which had affected importer countries in the world.
     "The world today is waiting for the United States whether or not it will be able to rescue its financial sector, because the real sector in the world cannot move if the world's banking industry is unable to offer it credits as working capital and funds to buy raw materials," Bambang said. (T.A014/A/HAJM/21:10/A/H-YH))  03-10-2008 21:17:15