Impact Of Global Crisis On The Indonesian Manufacturing_050809

The Impact of Global Crisis on Indonesian Manufacturing Industries By: Hendra Manurung The World Bank predicted that the global economy in 2009 to 2010 still shows the grim conditions (Report on Global Economics Prospect 2008, World Bank). This appears over global economic growth slowed in 2010 that the more, while the volume of transactions fall in global trade for the first time in 26 years (1983-2009), the condition after the worst international oil crisis (1978-1985). In this report, the World Bank estimates cut sharp global economic growth in the year 2009, which will only reach 0.9% of the volume of trade will be decreased by 2.1%. Contraction of trade this is the first time since 1982 years ago. Bad debts crisis going on in the world since mid October 2008, and destroyed the economy stabilization of developed countries and the poorest countries, to cause the economic growth of developing countries according to the version of the World Bank estimated that only grow around 4.5%, while the rich countries is estimated a contraction of economic growth 0.1 percent. Projections from the appear pessimistic predictions have been made in June 2008, estimates that the economic growth of developed countries is only 3%, while developing countries experienced growth of 6.4% (World Bank Report 2008). In November 2008, three different institutions, namely IMF, Director General of Economic Affairs and Finance of the European Commission, and Fitch Ratings Agency concluded the economic condition of the world toward global economic crisis, with the declining economic growth in each area in early 2009. Prospect Manufacturing Industry 2009 – 2010 The World Bank estimates economic growth in 2009 is only able to achieve 4.4% and recover in 2010 with economic growth at 6% (World Bank Report 2008 on Indonesia). Other ASEAN countries, such as Thailand is only the economic growth that is lower than Indonesia that is only about 3.6% in 2009. From different projections, and generally agreed that economic recovery will occur in early 2010. Prospects of economic growth of Indonesia in the last quarter period September-December 2008, has begun to indicate conditions worse than in the previous threequarter period May-August 2008. However, entering the first quarter, the period of January-April 2009, Indonesian economy is still in the capital and the resilience of both the global economic crisis in 2009 to 2010. Very different conditions faced by ASEAN countries, like Malaysia and Singapore, where the role of exports to the GDP of Indonesia is not as much as the neighboring countries reached nearly 100%. Thus the decline in international export markets does not directly kill the local industry, because there is still the domestic market that is able to absorb part of the production industry. Indonesia economic stability depends on household consumption as the locomotive of growth. Although the current purchasing power decline, but during October to November 2008, the government has taken a policy giving incentives to support the increased buying power the community, with the lower price of fuel oil and other basic material needs, that reduce the burden of public expenditure. Bank Indonesia also has lower interest rate from the BI rate to 7% level that is lower (BI Rate on June 2009), so that the expected interest rate loans for consumption decreased to 8%. In the end this is also encouraging the increased buying power the community.

The flow of foreign capital was also partially re-start, so that the rupiah exchange rate is also more stable at Rp10.500 – 11.000 per U.S. dollar. In the past 2008 years, it is known that the development of the national manufacturing industry, especially steel production has reached 4 million tons, but the achievement of this difficult to achieve in the year 2009, because almost all sectors, including property development and infrastructure affected by joining the global crisis (Data Department of Industries RI, 2008). Besides, the manufacturing industry has also cut the amount of production in 2009, because the global financial crisis was the most industrial sectors of steel and a reduction in the amount of labor, told by Erwin Aksa, Chairman of the General Association of Young Indonesian, and national steel industry to cut production estimate in 2009 of 30% to 40%. Director General of Industrial Metal, Machinery, Textiles and the Ministry of Industry Aneka said that steel production is estimated to Indonesia in 2009 reached 30 percent down to 40 percent, while the number of steel production in 2009 is estimated at only 2.4 million to 2.8 million tons. There are three factors cause producers to reduce the amount of their production. First, the upstream and downstream producers still have a stock pile of materials that they buy at high prices; Second, the weakening of rupiah exchange rate against U.S. dollars; Third, the high dependency of the domestic industry against imports of steel products. Still can not be processed or accumulate raw materials of steel, because at the end of the year 2008, some steel producers to import steel dominated the steel form the raw material iron ore, billet, steel and rough (scrap). This is evident from the import of steel during the period January-October 2008 jumped to 124%, compared to the same period in 2007, from U.S. $ 4.52 billion to U.S. $ 10.15 billion. But with declining prices of steel products such as steel grind so hot (hot coils rolled), the import of raw materials and increasing the potential can not be processed or accumulate in the warehouse. The downstream product prices at this time tended to decrease, while prices of raw materials tend to be stagnant product. The weakening of the export market it was estimated became the main obstacle for the manufacture industry during 2009. Estimated during 2010, the export market began to be again restored, so as in 2009 will become the most difficult and defiant year for the sector of the national manufacture industry. The policy of the fiscal Stimulus in 2009 The decreasing level of national inflation second quarter fiscal year 2009, and the BI policy to encourage a decrease in interest rates, is not immediately followed by economic growth that is still hampered by lack of liquidity in the national banking sector, because it is still hampered loans between banks. Currently, liquidity in the banking sector still accumulates the major banks, especially state-owned bank. Still worsen concerns the economy and rising bad debts, resulted in a national bank is very careful in lending, including to the other bank. Ultimately, small banks have liquidity problems and are forced to increase interest rates in order to collect deposits of public funds. Thus, the interest rate the loan can not go down, even though BI has been lower interest rates gradually tribe. To expedite liquidity bank needed fiscal stimulus from the government to help increase liquidity in the financial sector. In December 2008, President Susilo Bambang Yudhoyono said the government stimulus package to prepare the budget of the national budget in 2009 drawn from the remaining part of the budget year 2008. Minister of Finance explains the determination of industry and commodity, one based on the creation of field labor. Menkeu says the government has prepared a fiscal incentive budget of Rp 12.5 trillion in APBN 2009. Government sectors to set as many as thirty one stimuli will

get Rp 12.5 trillion of the 17 industry sectors will have facilities VAT by the government (DTP), while for customs DTP 14 is distributed to the industrial sector. Fourteenth to the sector incentive BM DTP obtained is Rp 2.4 trillion. While the stimulus for additional Rp 38 trillion as an additional stimulus is Rp 50 trillion to maintain economic stability and also as a stimulus. President Susilo Bambang Yudhoyono said the government also plans to increase infrastructure development that has been done by the Department of Public Works, Ministry of Transportation, State of the Ministry of Public Housing, the Ministry of Energy and Mineral Resources, and Department of Agriculture for this. However, how much impact the global economic crisis on the real sector, especially to small and medium enterprises (SMEs), seems to need to be anticipated. Fiscal stimulus from the government is expected to broaden the financial sector liquidity, so that the business is able to move back. Implementation of this policy is very much determined the ability of economic challenges facing Indonesia in 2009 and 2010. The existence of small and medium enterprises was evidently able to survive the global economic crisis to the present, especially in supporting the resilience of the national manufacturing industry. The cause is still waiting for exporters of goods from purchase order buyers / customers from overseas, the season in the country participate in a trading partner, and not stabile business that export-oriented small and medium enterprises. The Strategic Interests of Manufacturing Industry In general, the industry sector experienced a decline in growth to 4.14 percent with the II quarter 2008 compared to the same period in 2007 which reached 5.17 percent. The decline is the growth strategy and the interests of the industry generally, which also occurred in The Oil And Gas Industry is not experiencing a growth of 4.49 percent and oil and gas industry is experiencing a growth of 0.65 percent. The biggest growth in the industrial sector achieved by non-oil industrial transport equipment, machinery and equipment as much as 15.82 percent, followed by Industrial Fertilizers, Chemicals & Rubber Goods of 3.49 percent, Basic Metal Industry Iron & Steel of 2.98 per cent, Industrial Printed Paper and Goods of 0.42 percent, and industrial wood products & other industrial forest of 0.32 percent. While the industry experienced negative growth in the largest industrial goods other minus 4.26 percent. Be if some manufacturing in Indonesia in 2000-an, are always busy thinking about the issue of short-term is very difficult to overcome such a deficit of energy, procurement and processing of raw materials; facilities roads, electricity, and food security , while the research is still a research priority for the industry long-term. Concrete steps needed, so that the vision, mission, strategy, and between manufacturing, research, and academic ideals of the mix, in addition to the central government has also expressed will provide other incentives such as easy as cutting investment taxes by 30% during 6 years for the manufacturing industry has been able to elaborate "technology pioneer" in the appropriate mandate revision No PP. 1 / 2007. When compared with the ASEAN countries other, the Indonesian government has not been able to in the provision of incentives for industrial research activities, especially research on the manufacturing industry. * The writer is lecturer of Public Relations & Communication Studies at Fac. Communication, President University, graduated from Saint Petersburg State University, majoring in Regional Studies of European Countries (1999-2002) with Russian Federation Gov’t Scholarships.