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5 - First Term Right, Second Term Shy: A Review of Indonesia's Economic Links with Key Trading Partners
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- By Manggi Habir, Independent Commissioner at PT Bank Danamon Indonesia Tbk, Chairman of the Supervisory Board at Danamon Peduli Foundation and President Commissioner at PT Asuransi Adira Dinamika.
- Edited by Siwage Dharma Negara, Deasy Simandjuntak, Ulla Fionna
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- Book:
- Aspirations with Limitations
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 08 June 2019
- Print publication:
- 29 June 2018, pp 83-104
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Summary
President Susilo Bambang Yudhoyono's (SBY) slogan of “a million friends and zero enemies” was effective in opening doors and is a useful starting point in reviewing how the president managed relations with Indonesia's key trading partners. However, this all-embracing framework is notoriously difficult to implement. In addition, impactful economic policies, it is often argued, rarely make everyone happy. For effective change to take place, one societal group usually gains more than the other, even in an all-win scenario. The argument is that making everyone happy leads to excessive compromise to avoid rocking the boat, which ultimately leads to, at best, incremental change and, at worst, the status quo being maintained.
This cautious and incrementalist theme, with a few exceptions, is reflected throughout SBY's term, and has hampered his administration's ability to chart an optimal course, especially at home. However, in a turbulent setting, where currents are shifting, this method has its merits. This chapter will assess whether SBY's government was able to get the best outcome from its three key trading partners, in light of rising tensions among them. Two of them, the United States and Japan, have had long trade and investment ties with Indonesia, while the third, China, is a more recent player. However, in a relatively short period of time, China has become a dominant economic and political power, dramatically shifting the status quo in the Asia-Pacific region.
This assessment will start with a brief background on how Indonesia's links with its three key trading partners — the United States, Japan and China — have evolved over time. It will then closely review economic policies during SBY's two terms and how they affected commercial links with each of these trading partners. In addition, it will review which of these policies met or fell short of their intended objectives. Finally, the chapter will examine whether there is anything that future governments can learn from the SBY administration's experience to better prepare themselves for further changes in future.
Events Leading up to SBY's Term
The forty-year period from when former President Suharto took over till SBY came into office saw the country's economic floodgates incrementally opening up as the country developed and gained confidence.
10 - The good, the bad and the promise of globalisation: a private sector perspective
- from PART 3 - Impact of and Response to Globalisation
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- By Manggi Habir, Independent Commissioner, PT Bank Danamon Indonesia Tbk, Jakarta
- Edited by Arianto A. Patunru, Mari Pangestu, M. Chatib Basri
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- Book:
- Indonesia in the New World
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 08 June 2019
- Print publication:
- 30 May 2018, pp 180-198
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Summary
This is an observer's attempt to shed some light on the impact of glo¬balisation on Indonesian companies, and on their responses to shifts in trends. I will start by describing the trends in globalisation during the formative years of the Sukarno era (1945–66), then in the development-focused Suharto period (1966–98) and finally during the current period of reformasi (1998–). The Indonesian economy was closed to the world during the Sukarno era but gradually and often reluctantly opened up during the subsequent two periods. Indonesia's globalisation journey has not been a smooth one, with more than its share of fits and starts. The overall direc¬tion, however, has been an unavoidable opening trend.
In the first section of this chapter I will discuss the impact of globalisa¬tion on the corporate landscape, especially the financial sector. During the Sukarno era, the relatively open shutters of the colonial economy began to close with the nationalisation of large Dutch companies. The economy gradually began to reopen during Suharto's New Order era, with the impact varying depending on the sector, the state of development and preparedness to compete of individual companies, and the nature of the government's regulatory oversight. In both the Suharto and reformasi peri¬ods, the most common response of sectors and companies to globalisation was to call for protection, and then to prolong that protection for as long as possible in order to capture domestic market share. This was easier than innovating and improving efficiency to better compete globally.
Even with the country's protectionist bias, however, the disruptive impact of globalisation could not be avoided. Industry players and regula¬tory authorities struggled to adapt to heightened competition and to the rapid changes in technology and business models. Globalisation helped bring about deforestation, pollution and the devastating 1997–98 Asian financial crisis. Local companies have had to cope with rising working, environmental and product quality standards, whether they liked it or not. Government regulatory oversight has become tighter and more com¬plex, raising the cost of corporate compliance. On the other hand, the Indonesian consumer has benefited from having more options and better-quality products.
10 - Bank soundness requirements: a commercial bank perspective
- from III - Banking Sector Reforms
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- By Manggi Habir, Indonesian Institute of Management Development
- Edited by Ross H McLeod
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- Book:
- Indonesia Assessment 1994
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 21 October 2015
- Print publication:
- 01 January 1994, pp 171-185
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Summary
Introduction A commercial banker recently described his bank's predicament as having to play in a field that has shrunken due to increased competition and, at the same time, having to perform with his hands tied behind his back ever more tightly, as a result of stricter central bank soundness requirements. The consequence, at least for the time being, has been a decline in the banking industry's profitability, most notably among the state banks. External market factors as well as stricter soundness regulations have both contributed to this trend. As improving soundness imposes certain costs, the dilemma for regulators is how to impose regulations that will improve bank soundness, without cutting too deeply into the banks’ profitability. Although a profitable bank might not necessarily be healthy, a healthy bank needs to be profitable.
In this paper, the challenges faced by banks are categorised into two areas. The first is external market conditions, highlighted by an increasingly competitive market as a result of the government's deregulation measures; these began in 1983, but had their strongest impact from 1989. The second is the stricter central bank regulations, introduced in 1991, designed to strengthen the soundness of banks. It is important to put the latter topic into better perspective, by touching first on the rapidly changing market environment faced by banks. The banks’ responses to these challenges are then discussed, and the paper concludes by noting various current trends, and those which might be expected to emerge in the near future.
External market conditions
Three market developments that had a major impact on banks during 1989-93 were: deregulation, that significantly increased competition among banks; the increasing importance of, and activity in, the capital market; and, as inflationary fears grew in the early part of the period, the government's tight monetary policy launched in 1991, which slowed bank asset growth considerably.