Monday, October 6, 2008
20 Chamber of Commerce Proposals to Avoid Crisis
Source: The Jakarta Post

The Indonesian Chamber of Commerce and Industry (Kadin) has proposed 20 recommendations to the government, to reduce the impact of the global liquidity crisis.

The recommendations were split into three categories: monetary, real sector and domestic economy resilience.

"As the only national platform for local businesses, Kadin has proposed these important preventive measures to prevent the global financial crisis from hitting Indonesia," Kadin chairman Mohammad Hidayat said in a statement.

Below are Kadin's recommendations.

Monetary:

1. The central bank must relax its tight monetary policy through a change of regulations covering the minimum reserve requirements for banks, and the extension of government repo bonds' maturity.
2. The government must speed up state budget expenditure, to bring liquidity (which has been absorbed by government bonds) back into the financial sector.
3. The central bank and the government must strengthen protocol for the Financial Safety Net program, and their role as "lender of the last resort", while keeping governance intact.
4. Improving trust in the financial sector by increasing the amount of capital covered by the Deposit Insurance Agency.
5. The government must support the deposit of foreign currency in banks by urging state enterprises with access to foreign currency to do so, and also urging big exporters to deposit their proceeds in local accounts. This policy would act as an important safety line, whereby state firms and corporations facing difficulty accessing foreign currencies could rely on local banks.
6. There is a need to create a financial pool to fund priority projects such as those in infrastructure.
7. The central bank must be able to coordinate with other central banks in the ASEAN region, to gain access to additional foreign reserves while conducting market operations.

Real Sector:

1. Reduce cost of logistics at ports.
2. Reexamine policy on additional costs for peak-time electricity.
3. Increases to minimum wages for workers should be left to negotiations between employers and employees.
4. Introduce special support for priority commodity exports.
5. Improve ease and timeliness for tax reimbursement process.
6. Rationalization of fees and retribution by central and local authorities.
7. Improve market protection measures that are in keeping with arrangements under the WTO.
8. Intensify measures to reduce import duties in export destinations.
9. Increase market diversification so as to reduce dependency on U.S. and European economies.

Domestic Economy Resilience:

1. Maintain consumer confidence.
2. Increase effectiveness of state budget spending.
3. Cut income tax and luxury goods taxes.
4. Speed up the development of infrastructure projects.