The government has nominated seven new figures to become national heroes, in recognition of their various contributions to the Republic of Indonesia.
Among the figures is former central bank governor Syafruddin Prawiranegara, Nadhlatul Ulama figure Idham Chalid, Surakarta sultan Pakubuwono X and Catholic Party founder IJ Kasimo.
The award ceremony was led by President Susilo Bambang Yudhoyono at Merdeka Palace on Tuesday, kompas.com reported.
A former General Elections Commission (KPU) commissioner Andi Nurpati arrived at the National Police Headquarters on Monday for questioning in relation to an alleged document forgery linked to the 2009 general election.
"I bring documents related to my field during my tenure as commissioner, and relating to the first KPU recapitulation result, its revisions, election result dispute [PHPU] documents and other documents," Andi said.
Andi arrived at the police headquarters at around 10:30 a.m. and was accompanied by her lawyer.
She said she was ready to be confronted with former Constitutional Court judge Arsyad Sanusi, who was also being questioned over an alleged election document forgery.
"I am ready, if the questioning mechanism requires me to do so, not only with Arsyad, but also other related people," she said.
Andi is alleged to have been involved in the falsification of a document issued by the Constitutional Court to settle a dispute between election candidates from the People's Conscience Party (Hanura) and the Greater Indonesian Movement Party (Gerindra), over a House of Representatives seat for South Sulawesi electoral district I. (rpt)
The National Police have instructed all police precincts to be increasingly alert following the bomb blast at the Cirebon police mosque this afternoon.
A bomb exploded at the At-Taqwa mosque located in the Cirebon police complex while many of the officers were performing Friday prayers.
“Of course everybody has to be cautious, especially police precincts and those providing services to the public,” police spokesman Insp. Gen. Anton Bachrul Alam said on Friday.
He added that he hoped the incident would not repeat itself.
“Let's combat terrorism that has existed for too long,” he said as reported by tempointeraktif.com.
Anton added that the National Police remained in coordination with the Cirebon police. The police were still investigating the type of bomb the alleged bomber used. The body of the suspected bomber, who allegedly strapped to the bomb to his body, was blown to pieces.
The day Bank Rakyat Indonesia (BRI) announced its 2010 earnings, which had grown nearly 60 percent from the previous year, the market welcomed the announcement cheerfully, and the company’s share price surged almost 6 percent.
BRI shares were not an exception as almost all shares of publicly listed banks did very well in 2010. On the back of strong economic growth and stable interest rates, the Indonesian commercial banks ended 2010 with stronger growth, marking a solid recovery from the depressed growth they experienced in 2009 in the aftermath of the global financial crisis.
Bank lending grew 23 percent, which was still below the peak in 2008, when their lending grew by
30 percent. But it was a strong growth from a depressed level of 9.9 percent in 2009. During the global financial crisis, the lending growth of the private banks fell more sharply than those of the state-owned banks.
But as private banks moved more aggressively to recover their lost ground after the crisis, their lending growth recovery was more robust than those of state banks. The ratio of state-bank loans to total bank loans slid from 38 percent to 36 percent.
From the current macro indicators it seems that the stage is set for more strong growth for the banks in 2011. GDP growth is expected to be stronger, and despite higher oil prices, the threat of inflation seems to be moderating, reducing the risk of monetary tightening by Bank Indonesia (BI), the central bank.
However, if banks are expected to maintain or even raise their loan growth this year, capital will be an important issue.
Indonesian banks have generally strengthened their capital to comply with a BI ruling on minimum capital requirement.
In 2010 banks were able to maintain their capital adequacy ratio (CAR) at 17-18 percent, far higher than the Basel II mandated level. Each bank has now more than Rp 100 billion of capital but the adequacy of these capital levels should be looked at in the context of high loan growth this year.
BI statistics show that there are still seven banks whose CAR are below 12 percent. As the CAR of
the state banks is lower than those of private ones, they would be under more pressure to raise capital.
For the state banks the most convenient way to strengthen their capital is by keeping retained earnings.
That’s why the issue of the dividend pay-out of the state banks will likely be hotly debated by the government and the House.
The Finance Ministry is asking the state banks to maintain their dividend pay-out ratio at last year’s level, because this has been used as the basis to estimate non-tax revenue in the 2011 budget.
The issue of loan growth is also related to the loan-to-deposit ratio (LDR), which is how much each bank loans per certain value of deposit. The overall LDR of all banks as of December 2010 was 75 percent.
This was below the minimum 78 percent required by the recent BI rulings.
This will force most banks to work hard to raise their LDR, otherwise they could face penalties by having to deposit more of their funds in the central bank to meet the required higher minimum deposit.
When the financial crisis hit in 2008, the net profit of Indonesian banks fell by 12 percent. The fall in earnings came mostly from the private banks, since they were apparently more exposed to global banking through their foreign ownership and networking compared to state banks.
The net profit of state banks surprisingly was only slightly affected by the crisis. But since the crisis, all banks have experienced robust growth.
In 2009 and 2010, they grew 47 percent and 27 percent, respectively. This growth surpassed the rate of growth before the financial crisis.
The high growth in bank profits has drawn criticism from the government and even from the central bank itself. The banks have been charged with charging their customers with too-high interest rates.
The net interest margin (NIM), the difference between interest received and interest paid by the banks, at 5.7 percent was considered too high, in fact the highest among their peers in the region. Critics said that high interest rates charged by the banks showed that the banks were actually inefficient.
The critics wanted to suggest that there was room for interest rate cuts by the banks by making bank operations more efficient. But data from BI actually showed that banks have been able to reduce their operating costs relative to their operating income.
The ratio of operating costs to operating income went down from 89.5 percent in 2005 to 86.1 percent in 2010.
The improvement in their efficiencies was made possible by their huge investment in Information Technology (IT) which has rewarded them with reduced transaction costs and has provided more convenience both to the banks and to the customers.
Banks have to keep abreast with the rapid development of IT and have to be ready to upgrade their
IT systems at any time. Otherwise they will be overwhelmed by fierce competition.
Now banks are facing pressure from authorities to raise their loan growth and at the same time to cut interest rates they charge to their customers. In other words the authorities are telling the banks that they should expand their lending but at reduced earnings growth. But for banks operating in Indonesia the problems of cutting interest rates is less related to efficiency.
The persistent high interest charged by banks reflects the structural problems of the economy
that is greatly influenced by extern-al factors.
In Indonesia bank lending constitutes the bulk of corporate financing, accounting for as much as 70 percent of corporate funding.
The rest is provided by the capital market either through public offerings or bond issuances. As long as bank lending dominates corporate financing, demand for bank loans will remain strong and keep interest rates high.
Historically, inflation in Indonesia has been high, and it remains so now. Because of this historical background, banks tend to include a premium for risk in their interest rates.
The risk also includes the difficulties of assessing the viability of their customers because of the opaque nature of their governance. Legal risk is another area that the banks have to deal with, since settlement of legal disputes through courts could be protracted for a long time.
Last year BI forced 14 major banks to cap their deposit rates in order to make lending rates lower.
Recently BI ordered those banks to announce publicly their base interest rate, that is the interest rate they charge to their prime customers in the hopes that open competition will ultimately bring down interest rates.
These kinds of measures would hardly succeed. Banks need a more favorable external environment to induce them to lower interest rates. That is why it is important for the government and BI to work together to create a better external environment for the banks.
The writer is an economist.
One important aspect of the currency bill that is being debated by the House of Representatives is redenomination.
The issue, raised by Bank Indonesia last year, has drawn controversy, although the spirit of the policy is to increase national “pride” in our currency, the rupiah.
The rupiah is one of the “cheapest” currencies in the world, with denominations reaching 100,000, second only to Vietnam’s dong, which has a 500,000 note. We would see if the advantage of this complex policy is justified.
Redenomination is a policy to change the denomination of a currency at particular ratio (Dogarawa, 2007). In most cases, redenomination is conducted only by eliminating a number of zeros in the old denomination. This change does not alter purchasing power; it is purely a matter of rescaling.
In a disclosed plan, Bank Indonesia (BI) will replace the current Rupiah with a new currency at a ratio of 1 to 1,000.
A cellular phone voucher which now costs Rp 100,000, for example, would be valued at Rp 100.
This process, of course, needs a transition period, in which all goods in the economy will have two prices: one for old rupiah and one for new rupiah.
The concept is really simple and many countries have adopted it. Since 1960, there have been 70 redenomination episodes (Moseley, 2005), including Turkey (2005), Romania (2005), Zimbabwe (three times between 2006 and 2008) and Brazil (1994).
Redenomination is usually conducted for two reasons: First, if an economy experiences high inflation and second in the case of a currency union. In most cases redenomination follows high and chronic inflation.
Turkey, for example, experienced almost 100 percent annual inflation in the 1990s before opting for redenomination. The accumulation of such a high inflation rate caused regular prices to reach astronomical levels. It was not surprising that when redenomination took place in Turkey, six zeros were removed from the currency.
Indonesia had a similar experience in 1965. After years of macroeconomic mismanagement, inflation reached 1,136 percent. Redenomination was performed, and the new Rp 1 replaced Rp 1,000 of the old currency.
The most important benefit of redenomination is restoring the credibility of policy makers. Through the policy, authorities send a signal that past macroeconomic management was wrong: That there were past mistakes but from now on the macroeconomic management will be more prudent.
Another advantage of (successful) redenomination is convenience. Most humans cannot deal in calculations that involve too many digits. We can imagine the hard time that a cashier or bank teller would have while handling currencies whose denominations reached billions (nine zeros). Even electronic systems could experience errors or crash if forced to handle transactions with too many digits.
It should be noted, however, that redenomination is a mere signaling instrument. It could succeed or fail to achieve its original goal. If a regime has entirely lost public confidence, a series of redenominations would not have any impact.
The Zimbabwe Central Bank performed redenominations four times (4th Zimbawe dollar) between 2002 and 2008, but annual inflation remained out of control. The bank gave up and since April 2009, Zimbabwe has adopted the South African rand and US dollar as a means of exchange.
The implementation of redenomination could impose a significant cost on a state. The principal cost is the adjustment cost.
BI has planned for 2013-2018 to be a transition period when both the old and new rupiah will be
applicable. In this period, every business player should display price tags using both the new and old currencies.
With millions different kinds of goods and services available, the cost of this adjustment will be high. In addition, enterprises should accommodate financial reporting / accounting in both currencies.
Another problem may arise due to coordination failures. It is possible that after the redenomination the new price of certain goods is not the same as it used to be.
This condition would most likely arise when market competition is not perfect because of the presence of monopolistic and oligopolistic practices. There would be a particular group of society that loses because of the redenomination.
While it must be admitted that the current ratio is not ideal, it is not psychologically disturbing either.
Inflation is well managed and has hovered below two digits for the past five years. It could be said that the government has succeeded in creating an image and reputation of prudent macroeconomic management.
No complaints have been heard of the number of digits in the currency, either. Therefore we need to question if this policy is necessary to improve the national image.
While it is not wrong to improve this image, all necessary costs of policy implementation should be calculated beforehand. Policy makers need also to answer if redenomination is a feasible means to reaching a better currency standing.
The most important benefit of redenomination is restoring the credibility of policy makers.
The writer is the head of the Center for Business and Economics Studies, Ma Chung
University, Malang.
President Susilo Bambang Yudhoyono on Wednesday attended an official ceremony in New Delhi to celebrate the 61st Republic Day of India.
Yudhoyono was welcomed by Indian President Pratibha Patil, the Indian prime Minister and other dignitaries, kompas.com reported Wednesday.
The celebration marks the adoption of the Constitution of India to replace the Government of India Act 1935, on Jan. 26, 1950. A grand parade through New Delhi is the largest event of the Republic Day celebrations.
Yudhoyono is not the first Indonesian president to become a guest of honor at the Republic Day celebrations. On Jan. 26, 1950, Indonesia’s first president Sukarno attended the celebrations as well.
After attending the Republic Day celebrations, Yudhoyono and First Lady Ani Yudhoyono are scheduled to attend a gathering with members of the Indonesian community in India.
At 5 p.m. local time on Wednesday, Yudhoyono and his entourage will leave India for Switzerland, for another state visit.
The Komodo National Park, home of komodo dragon (Varanus comodoensis), in East Nusa Tenggara ranked sixth in the New 7 Wonders of Nature list, an ongoing global poll to determine the new seven wonders of the world, by December 2010.
“The New 7 Wonders Foundation reported that by the last week of December, the Komodo National Park sat at sixth position, based on the level of voter interest measured within the last 28 days,” Ulbadus Gogi, the head of promotion division at the East Nusa Tenggara Culture and Tourism Agency, said Tuesday, as reported by Antara.
Ulbadus added that the local government was optimistic that the park would be selected as one of the new seven.
“The East Nusa Tenggara governor [Frans Lebu Raya] has always said the Komodo [dragon] is a national treasure that belongs to all of us, which we have to support,” he said.
He added that the local government would continue to promote the animal to garner more support.
The Komodo National Park is one of 28 candidates for the New 7 Wonders of Nature, whose campaign began in 2007. The results of the competition will be revealed on November 11.
Indonesian migrant workers in Malaysia will support Indonesia’s national team in the away leg of the 2010 Asean Football Federation Suzuki Cup 2010 final at Bukit Jalil stadium in Kulala Lumpur, Malaysia, on Dec. 26.
“We are hoping to see a lot of ‘red’ worn by the 3 million workers in the first leg of the AFF Cup final,” Aburizal Bakrie, the Golkar Party chairman, said in Jakarta on Monday as quoted by Kompas.com.
There are millions of Indonesian workers in Malaysia.
The national team’s coach, the Democratic Party chairman and the Indonesia Soccer Association (PSSI) shared the same view.
“I hope to see at least half of the stadium filled with people wearing red and white,” Alfred Riedl, the national team’s coach, said Monday.
The Indonesian Soccer Association (PSSI) asked the Indonesian Embassy in Kuala Lumpur to organize migrant workers to support Indonesia. The association said it would also meet with the Malaysian local organizing committee about arranging tickets for the supporters, as well as their security.
