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THE Government of Indonesia (GoI) on Tuesday 12th June 2007 unveiled its longawaited package of new economic policy reforms that will, among other things, provide tax incentives for publicly listed companies and facilitate easier access to bank loans for small and medium enterprises (SMEs). Coordinating Minister for the Economy Professor Boediono said that the new reforms would significantly boost the government’s efforts to accelerate economic growth so as to reduce unemployment and poverty. On The Jakarta Post he said, “Hence, each of the policies contained in the new package set out the program, action and output with clearly measurable targets,”.
The 60-page policy package covers programs and measures in four main economic fields. That is the financial, the investment, the infrastructure development and (again and again) SME sectors. In the investment sector, the GoI will reduce the time required for obtaining business licenses to 25 days from the current 97 days. It will also simplify customs clearance procedures so that goods can be released through the green channel within 30 minutes and through the red channel in three days. Wait a minutes dude, 30 minutes in Indonesia with 'alonalon waton kelakon' perspective? Tape deh... (alon-alon waton kelakon similar with 'slow but sure')
Another minister –DR Sri Mulyani Indrawati- said that it would also provide tax incentives for publicly listed companies as part of the government’s efforts to turn the country’s capital market into an important alternative to the banking sector for businesses in raising funds.
She said that this regulation detailing the tax incentives would be issued in August -maybe on 17th August Indonesia's independence day.
The government will also push for the merger of the Jakarta Stock Exchange (JSX) and the Surabaya Stock Exchange (SSX) to make them more competitive and efficient, she added. According to the document, the merger process is expected to be completed in October.
In addition to providing tax breaks for publicly listed companies, the new economic policy package also stresses the need to provide SMEs with easier access to bank loans. For this, the government will strengthen the financing capacity of state credit insurance firm PT Asuransi Kredit Indonesia (Askrindo) and state financing firm Perum Sarana Pengembangan Usaha so that they can extend the scope of their services to SMEs.
Also in the SME sector, Bank Indonesia will revitalize the role of local financial consultants so as to increase the bankability of SMEs. Local financial consultants? Please deh, remember about the death of Konsultan keuangan mitra bank.
Prof Boediono said the government would also speed up land certification services for small businesses by revising the existing regulations issued by the National Land Agency, the Ministry of Home Affairs and the Ministry of Cooperatives and SMEs. “This is important so that small firms can use their land titles to secure loans,”he said.
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What’s wrong with this package? Nothing wrong. But actually we have some problem on implementation and coordination. This package need about 141 action between 19 offices. It would need cooperation with financial and credit institution but on the reality it just make ‘vicious circle’ on the administration and organization of government beaureaucrat. On the SBY-MJK’s regime this package is 4th time regulation that has declared by the ministry. The three regulations before couldn’t be implemented (based on Media Indonesia’s Editorial 13 June 2007). Take some example on investment (there is no improvement on FDI), infrastructure (just 10 projects has been implemented, the other 80 is nothing), on financial there is a good phenomenon that Bank Indonesia has cut down is interest until 8,75% but its not followed by the commercial banks.
Another ridiculous fact that the Local Goverent still use its APBD to be saved in BI’s interest (SBI). Sri Adiningsih and Fadhil Hasan talk more about it on Media Indonesia.
Ladies and Gentleman,
It’s a great policy if we connected the regulations with creating a conducive environment for microfinance (MF) in Indonesia and the SME. It is still very much needed. The long history of microfinance in Indonesia dating back to colonial times, more than 100 years ago. Historically, the government in Indonesia has always played an important role in promoting MF and it continues to do so today through BRI and the pawnshops, whereas the private sector only became involved in MF in the 80s after the deregulation of the financial sector. Even after such a long history of MF there is still a gap between demand and supply of financial services for the people in this country. In most countries central banks wont accept a role in MF. In Indonesia, BI has evolved from playing a developmental role to assuming a promotional role in MF and RF under the new central bank law promulgated in 1999. Since then, BI is no longer regarded as an
agent of development. It can no longer provide loans to the MF and Rural Finance (RF)
sector and has handed over these activities to a government owned company named Permodalan Nasional Madani (PNM). For Bank Indonesia there is three elements in the promotional role of BI: regulation and supervision of MFI, institutional development and capacity building (e.g., the linkage program for commercial banks and rural banks, the establishment of a credit bureau and the provision of a legal basis for MF) and technical assistance, including training of staff of commercial banks, sector information and consultancy services, which are partly funded by BI. The package need coordination by emphasizing that the central bank and the government still need to play an important role in MF and RF. Indonesia has just designed a long-term plan for its banking industry. Within this plan, MF has been given high importance by integrating it into the overall banking sector. We have to making coexistence of both new and old paradigms in Indonesia’s package and that coordination between different government ministries has been and continues to be difficult. However, by providing the right answers to the question of capacity building under the new paradigm one may have a substantially larger impact on MF and RF than with the former policies of subsidized rates of interest.
The Government I think have to stressed the need for a microfinance law to properly deal with regulation and supervision of MF. In the past, we had more government failures than market failures. Now, it may be the other way around and we have to carefully analyze whether we are dealing with a market failure or a government failure before taking any action.
The 60-page policy package covers programs and measures in four main economic fields. That is the financial, the investment, the infrastructure development and (again and again) SME sectors. In the investment sector, the GoI will reduce the time required for obtaining business licenses to 25 days from the current 97 days. It will also simplify customs clearance procedures so that goods can be released through the green channel within 30 minutes and through the red channel in three days. Wait a minutes dude, 30 minutes in Indonesia with 'alonalon waton kelakon' perspective? Tape deh... (alon-alon waton kelakon similar with 'slow but sure')
Another minister –DR Sri Mulyani Indrawati- said that it would also provide tax incentives for publicly listed companies as part of the government’s efforts to turn the country’s capital market into an important alternative to the banking sector for businesses in raising funds.
She said that this regulation detailing the tax incentives would be issued in August -maybe on 17th August Indonesia's independence day.
The government will also push for the merger of the Jakarta Stock Exchange (JSX) and the Surabaya Stock Exchange (SSX) to make them more competitive and efficient, she added. According to the document, the merger process is expected to be completed in October.
In addition to providing tax breaks for publicly listed companies, the new economic policy package also stresses the need to provide SMEs with easier access to bank loans. For this, the government will strengthen the financing capacity of state credit insurance firm PT Asuransi Kredit Indonesia (Askrindo) and state financing firm Perum Sarana Pengembangan Usaha so that they can extend the scope of their services to SMEs.
Also in the SME sector, Bank Indonesia will revitalize the role of local financial consultants so as to increase the bankability of SMEs. Local financial consultants? Please deh, remember about the death of Konsultan keuangan mitra bank.
Prof Boediono said the government would also speed up land certification services for small businesses by revising the existing regulations issued by the National Land Agency, the Ministry of Home Affairs and the Ministry of Cooperatives and SMEs. “This is important so that small firms can use their land titles to secure loans,”he said.
----
What’s wrong with this package? Nothing wrong. But actually we have some problem on implementation and coordination. This package need about 141 action between 19 offices. It would need cooperation with financial and credit institution but on the reality it just make ‘vicious circle’ on the administration and organization of government beaureaucrat. On the SBY-MJK’s regime this package is 4th time regulation that has declared by the ministry. The three regulations before couldn’t be implemented (based on Media Indonesia’s Editorial 13 June 2007). Take some example on investment (there is no improvement on FDI), infrastructure (just 10 projects has been implemented, the other 80 is nothing), on financial there is a good phenomenon that Bank Indonesia has cut down is interest until 8,75% but its not followed by the commercial banks.
Another ridiculous fact that the Local Goverent still use its APBD to be saved in BI’s interest (SBI). Sri Adiningsih and Fadhil Hasan talk more about it on Media Indonesia.
Ladies and Gentleman,
It’s a great policy if we connected the regulations with creating a conducive environment for microfinance (MF) in Indonesia and the SME. It is still very much needed. The long history of microfinance in Indonesia dating back to colonial times, more than 100 years ago. Historically, the government in Indonesia has always played an important role in promoting MF and it continues to do so today through BRI and the pawnshops, whereas the private sector only became involved in MF in the 80s after the deregulation of the financial sector. Even after such a long history of MF there is still a gap between demand and supply of financial services for the people in this country. In most countries central banks wont accept a role in MF. In Indonesia, BI has evolved from playing a developmental role to assuming a promotional role in MF and RF under the new central bank law promulgated in 1999. Since then, BI is no longer regarded as an
agent of development. It can no longer provide loans to the MF and Rural Finance (RF)
sector and has handed over these activities to a government owned company named Permodalan Nasional Madani (PNM). For Bank Indonesia there is three elements in the promotional role of BI: regulation and supervision of MFI, institutional development and capacity building (e.g., the linkage program for commercial banks and rural banks, the establishment of a credit bureau and the provision of a legal basis for MF) and technical assistance, including training of staff of commercial banks, sector information and consultancy services, which are partly funded by BI. The package need coordination by emphasizing that the central bank and the government still need to play an important role in MF and RF. Indonesia has just designed a long-term plan for its banking industry. Within this plan, MF has been given high importance by integrating it into the overall banking sector. We have to making coexistence of both new and old paradigms in Indonesia’s package and that coordination between different government ministries has been and continues to be difficult. However, by providing the right answers to the question of capacity building under the new paradigm one may have a substantially larger impact on MF and RF than with the former policies of subsidized rates of interest.
The Government I think have to stressed the need for a microfinance law to properly deal with regulation and supervision of MF. In the past, we had more government failures than market failures. Now, it may be the other way around and we have to carefully analyze whether we are dealing with a market failure or a government failure before taking any action.
kang_aan
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