Indonesian leader defends economic record as term winds down
August 17, 2013
Indonesian President Susilo Bambang Yudhoyono. — Reuters pic
JAKARTA, August 17 — Indonesian President Susilo Bambang Yudhoyono offered a favourable assessment of his record even as growth slowed before the 2014 elections, saying the government has expanded the middle class and kept the budget deficit low.
The budget shortfall has stayed under 3 per cent of gross domestic product, unemployment and poverty rates have fallen, and the country has achieved an investment-grade rating, Yudhoyono said in an annual speech in Jakarta yesterday ahead of the nation’s independence day. The government sees economic growth of 6.4 per cent next year, he said yesterday in a separate budget speech, a level at the bottom end of a target range set last month.
Yudhoyono, due to hand over power in elections next year, is seeking to shore up his legacy of political and economic stability in the world’s fourth-most populous nation. As he nears the end of a decade in power, the leader faces an economy that is growing at the slowest pace since 2010, a slumping rupiah and the fastest inflation in more than four years.
“Volatility in the global economy and commodity prices remind us of the need to diversify our sources of economic growth,” Yudhoyono said in the budget speech. “Indonesia can’t rely on natural resources and unskilled labor any more.”
Yudhoyono said he expects the country’s per capita GDP to approach US$5,000 (RM16,376) by the end of 2014, up from US$3,592 in 2012. The country has maintained growth above 4 per cent during his tenure, as spending by the growing middle class shielded Southeast Asia’s largest economy from the 2008-2009 financial crises.
Middle Class
“People’s purchasing power continues to increase, the middle class is growing significantly, fiscal and monetary stability are maintained,” Yudhoyono said in his first speech. He said the country had withstood external shocks such as a global oil-price spike and the financial crisis.
The government expects a slight improvement in the global economy next year, he said. The 2014 budget assumes a deficit of 1.49 per cent of gross domestic product, even as capital spending is set to rise 6.9 per cent from this year, including on higher wages, the election and food security, Yudhoyono said.
Gross domestic product increased 5.81 per cent from a year earlier in the three months ended June 30, the first time the economy grew less than 6 per cent since 2010.
“A 6.4 per cent target for GDP is too optimistic, given the global economy is slowing down, investment and exports are in a slowing trend,” said David Sumual, chief economist at PT Bank Central Asia in Jakarta. Sumual said he expects GDP to grow about 6 per cent next year.
Stock Losses
PT Bank Rakyat Indonesia led banking-stock losses, falling 6 per cent yesterday, while auto seller PT Astra International dropped 3.1 per cent, as investors worry about slowing lending and consumption. Foreign funds pulled US$195.5 million from Jakarta equities this year as of yesterday, data compiled by Bloomberg shows.
The rupiah touched a four-year low yesterday. A report earlier this week showed foreign reserves fell for a third month to US$92.7 billion in July, the lowest level since October 2010. That compared to US$35.4 billion when Yudhoyono assumed the presidency in 2004, according to data compiled by Bloomberg.
The current-account deficit widened to US$9.85 billion in the three months through June, data from Bank Indonesia showed yesterday. That was the biggest shortfall since at least 1989, figures compiled by Bloomberg show.
Political Ceiling
While Yudhoyono was re-elected with more than 60 per cent of the vote in 2009, he hasn’t been able to overcome parliamentary opposition to economic reforms, Wellian Wiranto, a Singapore- based investment strategist at the wealth management unit of Barclays Plc, said in an e-mail on August 15.
“Political limitation has put a ceiling on how much the Indonesian economy can achieve when times were good — and may well affect how readily the government can now put a floor on a growth slowdown during this tricky period,” Wiranto said.
Yudhoyono said yesterday that food-price volatility remains a challenge and the country plans to add 40,000 hectares of new rice fields as it targets a 10 million ton surplus of the staple grain next year. Higher food prices and the government’s move to lift subsidized fuel prices in June drove the inflation rate to a higher-than-expected 8.61 per cent in July, the highest since 2009, data showed on August 1.
Higher inflation expectations led the central bank to be the first in Asia to raise interest rates this year, with a total increase of 75 basis points in June and July. It left the rate on hold on August 15.
Gas Prices
The move to raise pump prices was aimed at capping an annual fuel-subsidy bill of more than US$20 billion that is sapping funds needed for roads and bridges. Next year’s budget allocates 336.2 trillion rupiah (RM104.81 billion) for total subsidies, little changed from 346.4 trillion rupiah spent last year. In his 2012 independence day speech, Yudhoyono promised to lift government capital spending by 15 per cent this year to boost infrastructure.
“So far, the government spending’s disbursement is always too late and capital spending will only increase 7 per cent next year, which is a very small rise,” Sumual said. “Indonesia can’t have hopes from government spending.” — Bloomberg
Muslim activists protest outside the Burma Embassy in Jakarta in this Aug. 9, 2012 file photo. (Photo: Reuters / Supri)
JAKARTA, Indonesia — Indonesia’s elite anti-terror squad arrested a man suspected of raising money for an alleged plot to attack the Burmese Embassy to protest that country’s treatment of Muslims, police said Monday.
Muhammad Syaiful Syahbani, 26, was captured Friday in Yogyakarta, a province on Indonesia’s main island of Java, said National Police spokesman Lt. Col. Agus Rianto. Another man who was with him was also being questioned by police, but his connection to Syahbani was not immediately clear.
In May, police arrested two suspected militants—Achmad Taufiq and Sefa Riano—in Jakarta, the capital, and seized five homemade bombs from a backpack they were carrying. Other explosive materials were found later at their rented house in southern Jakarta. The two told authorities they wanted to retaliate against Burma for recent attacks there on Rohingya Muslims. Riano had posted messages on his Facebook indicating he planned to “take action” at the embassy.
Days later, police arrested three other group members including Rohadi, the group leader, who like many Indonesians uses only one name. Their interrogation led police to Syahbani’s whereabouts.
Last week, a small bomb exploded outside a Buddhist temple packed with praying devotees in Jakarta. One person was injured, but two other devices failed to explode. Officials have said the attack appears to have been meant to avenge the death of Muslims in Burma.
Sectarian violence in Buddhist-majority Burma has killed scores of people, and tens of thousands of Muslims have been driven from their homes.
Indonesia has been battling terrorists since the 2002 bombings on the resort island of Bali that killed 202 people, mostly foreign tourists.
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