The Art of Mind

My Indonesian Crisis paper.. almost finish ;p

2008-10-15T03:03:00.000-07:00

In 1988 the Indonesian governement of Orde Baru regime, implemented a policy package called Pakto 88 to extend the role of banking and financial institution in controlling savings, boosting export, increasing efficiency and profesionalism in the business world.

Pakto 88 provided the opportunity to establish Development as well as State-Owned banks, without having complex requirements; a bank can be established with only ten billion rupiahs for capital. The policy simplified the criteria for banks that wants to upgrade its status to be a bank that can hold foreign direct investment, and also widening the chance to do joint venture with foreign banks. Pakto 88 also allowed foreign banks to spread their branches in certain areas. Besides those simplicities, the minimum liquidity requirements for rupiahs and other foreign currencies were replaced from 15% to 2%.

For the completion of Pakto 88, the government created a package that contained some tools to appraise merged banks’ health, capital adequacy clearance, lending limit requirements, and giving more chance for banks to give funds for other institutions also expansion of short and long term lending.

The implementation of Pakto 88 had created changes for Indonesian banking sector, commercial banks had experienced a rapid growth, and the growth of commercial banks dominated the role of national banks. This can be seen from the establishment of many new commercial banks.

In that year, many big companies established new banks. In 1988-93, Indonesia had at least 109 new banks and 2.720 bank offices. From the saving side, the growth also increased by 45% in 1989 reached the value of 54.4 trillion rupiahs, and in 1990 it increased for 121.7% compared to 1988 for the value of 83.2 trillion rupiahs. However, an increase in saving was also accompanied by an increase in credits, in 1989 lending increased by 44.5% to 63.6 trillion rupiahs, and in 1990 it increased by 122% compared to 1988 to 97.70 trillion rupiahs.

The loosening liquidity system caused the economic situation heated and inflation arisen. Money supplies increased by 23.4% in 1989 and 73.2% in 1990. The degree of inflation reached two digits 9.5% in 1990 and also at the same rate in 1991.

The situation forced the government to conduct new monetary policy in 1990, government gave limitation on credits, and tight monetary policy was also conducted to cool down the economy. Moreover, the government also increased the interest rate for Bank Indonesia’s bonds ( Sertificat Bank Indonesia) which therefore increased the nominal interest rates for other bonds in the market and Interbank Call Money.

The increase in interest rates, therefore resulting a decrease in savings (money collected from the citizens) for 14.4% and also credits to 16.3%. Thus the policy taken has resulted damage in banking industry and created a competition among banks to attract savings from public. At that time the saving interest rate reached 23-24 percent and credit interest reached 27-30 percent. So basically 38-40% return on investment was needed, which was obviously high.

A high interest rate induced less borrowing from public, which means banks were in difficulty in channeling its fund for profitable projects, and it also created more probability of bad debts or default of the borrowers because the interest was away too high. In that kind of economic situation, many banks were outperformed in their operation, and not only were few of them lack of supervision and bad management. It was found in most cases that the owner and management of the bank did not really comprehend in banking business.

The competition between commercial banks to create as much profit as possible by giving faster credit than it supposed to be had abandoned the prudential banking principle and the technical side of providing loans. The banking industry in Indonesia had become careless in giving out loans in the booming year of investment; it abandoned the legal lending limit, and tight money policy caused difficulties for the borrowers to repay their debts. This condition still presented until 1993, lack of credit control causing bad debts and forced the businessmen to expand their borrowings from foreign countries to balance their economy. Therefore this repayment of debts increased the money demand of US dollars thus led to its appreciation.

This gives us a picture that crisis in 1997 was not the major cause of Indonesian bankruptcy. Indonesian economy has been fluctuated since Pakto88 was created, huge capital inflow and outflow, government failed in controlling and sticking its commitment to the economy by doing corruption. The attraction of short term profit left the government blinded, fake export accounts were found in many cases, and in 1997 Eddy Tanzil, owner of a bank ran away with one trillion rupiahs. Not surprisingly in 1997, the crisis that hit South East Asia made Indonesian economy overheated, because Indonesia had already huge liabilities in terms of US dollars, and the depreciation of the currency created the balance sheet effect, which caused the larger amount of liabilities.

Pulang Ke Ibu Kota

2008-08-14T03:49:00.000-07:00

Besok waktu yang ditunggu2 selama ini..kepingin ketemu adik2ku yg pastinya sudah bertambah tinggi, papa mama yg gendutan, dan sodara2 lainnya. Hari ini padat bgt jadwalnya, harus beli oleh2, yg membuat koper gw keberatan, krn adik2ku yg nakal2 nitip2in byk celana jeans sm sepatu. belum lagi apartment belum dibersihin, ngeluarin sampah, and all dirty dishes..tapi pengen cepet2 nyampe terus nagsih liat foto2 rumah baruku ke papa, I'm sure he'll be proud of me. Soalnya sebelum ke belanda, gw ini orangnya selalu maunya gampang aja, tinggal minta tolong orang. Sekarang disini krn biaya buruh mahalnya setengah ampun, apa2 hrs ngerjain sendiri, termasuk renov tmpat tinggal. tapi ada sih sebagian yg dibantu, ky masang carpet dikerjain org lain.tapi designya, warna tembok, warna carpet, sampai gordijn sgala gw semua yg pilihin. nge cat juga nge cat sendiri lho, tapi dibantuin pacar, soalnya gw gampang cape..pegel bgt abisnya. so, at the end we were so happy staying here, it's like enjoying our own creation.

Why I said money can buy happiness?

2008-08-04T13:34:00.000-07:00

Many people asked me why I think money can buy love (happiness) but not the other way around.. When I was a junior high school student my teacher told me, when you are sick, or your wife needs to give a birth, will you pay it with your love?? no, it's impossible..

But, If you have money you can buy the world..many people said i might be wrong, since we have seen so many people died from suicide even they had a lot of money, for example hollywood actresses and actors often filed themselves into trouble from the exposures they got (stress isn't it). but everybody does have stress, not only the filthy rich people.. once I read a novel saying "you are in trouble, because you make yourself in trouble. you got broke, because you want to be broke" so.. when money makes your life complicated, maybe because you are not grateful or you are thinking of something irrationally.

In my point of view, when you have money you can buy love and happiness..maybe indirectly, but you can buy the smile on uneducated children by providing them better education, here you are not only buying one love or happiness, but you can buy future for them. Also you can save people's lives from hunger and desease.

;p Ciao..

For me, never change the system first!

2008-08-03T05:47:00.000-07:00

Do you think the tax system should be improved?Yes sure! I agree for sure just like I agree on simple words "Infrastructure needs to be improved", in my point of view every single thing that requires a system needs the same implementation just like infrastructure. if someone asks me what needs to be improved for Indonesia, my answer is EVERY SINGLE THING. the systems that allows desease (curruption, colluison, and nepotism) to infect the system itself needs to be cured. But in my view, there won't be such perfect system in the world, everybody may got sick at least once in his/her lifetime, even we often found viruses in our computers. .. Here's one question, have you ever got a virus or problem in your computer and you asked someone or mechanic to solve it, and after he fixed it, the computer works normally again, but after view days or months it broke down again..and then you asked again for help.

This case is the same case for our economy, we keep asking for the government to improve our economic, infrastructure, health, political situation..but once they act like they have done something that will give us benefit, we'll think that our problem will be solved soon, and will be happily ever after..ahh, that's impossible..many people got fooled by government promises, why?? because many people in Indonesia don't get what they deserve to have, EDUCATION. even sometime not only the citizens but also people who got power in Indonesia don't have clear formal background. so this is even worst, we are counting our lives on the people who don't understand how to work the system itself.

What I'm trying to say here is, we can keep improving the systems, like what I said before, Indonesia needs everything to be improved, but it's impossible to improve everything in the same place. The first concern that must be taken care of is education, since it will be useless improving or changing the system when the people don't know how to work with the system itself. concerning developed country, there's no country with so called PERFECT SYSTEM, even United States, but they have better education for their citizens, that for every single thing that the government does they can be critical against it. because they understand how the system works from education they got.

So it's such a waste of money creating more infrastructure or changing the system, without complementary of education. as you can see for example, we keep implying Keluarga Berencana, to restrict the increase of number population, but it still can't be implied quite well, and the impact is still questionable, because still have not educate them 100% (Ive seen some advertisement on the TV, and I believe there are some polyclinics do educate the citizens, but still not sure if it's 100%).

Based on knowledge, The proper way to win the competition in the era of globalization is by increasing the quality of the people through well-programmed human resource development.
Education is believed as one of the important endeavors for improving the quality of human resource for it provides the potential human resource with the competitive competencies that comprise knowledge, skills, and attitudes needed for winning the competition as well as in national development.
Education in Indonesian is still facing some major problems and the most crucial
ones are those related to access and quality.

What should be first get fixed?

2008-08-03T04:55:00.000-07:00

Is the road should be taken care first? Is the bus-way should be done first?? Or which building should be built?? I think none of them should be our best interest. I know based on my knowledge that roads and transportation work as infrastructures thus need to be improved to attract foreign direct investment in the country, to make all the business to be conducted smoothly.

Indonesia is big, now I'm going to take Jakarta as to make it more specific. Jakarta is even bigger than the city where I live now (Amsterdam), that is why maybe in the view of government,it needs more infrastructure (buliding,roads, etc) but as you can see we have already so many infrastuctures, still we can't solve the traffic problem. We also have created the busway on that purpose ("to solve the traffic probs", which is the purpose it self is questionable), and also there was a ridiculous idea in making monorail IN THE SAME PLACE!! so at the same region we're gonna have ROADS,MONORAIL,AND BUSWAY.. as you all can see that this is aimed for more than just solving the traffic. If you want to create more infrastructure that smoothen the economic activity by attracting the foreign direct investment, it will be in our best interest if the government starts making an extended route like Jakarta-Bandung toll road.

Also, if they want to make a better organized infrastructure, they won't make everything in the same area, they will spread it over. It will be just a waste of money, and everything will be centralized in the area that the government believes will generate more money (for example Sudirman) than growing the area that actually has a potential to grow by allowing commuters to work more efficiently. still until now, they have difficulties to commute because the governments tend to focus on making the centralized industry area to become more centralized than helping them.

And what about the cannal transportation?? We'll dicuss it again maybe tomorrow ok!, can't wait.. I need to go now.. Ciao