'Sarapan Ekonomi,

Tax rush

2009-06-23T18:04:00.004+08:00

The number of taxpayers stood at 14.1 million in May, a jump from 10.6 million at the end of 2008, indicating an increasing awareness of people to pay tax, according to the tax office.

The tax office has provided incentive and disincentives to taxpayers in order to attract new taxpayers, tax office chief Darmin Nasution said Monday.

That's an increase of 33%!

Still, only one for every ten adult population is a registered taxpayer in Indonesia.

Neoliberalism, anyone?

2009-06-10T14:17:00.007+08:00

I do not really see the point of the debate over neoliberalism.

The critics seem to suggest that market liberalization, privatization and deregulation are evil. The proponents, on the other hand, if this subhuman species exists, glorify them as the miraculous policies that cure all the economic ills of the world.

The truth is, of course, as always, more complicated than this kind of caricatures. It is true that market liberalization, for example, may wreak havoc a market. But, done right, it can do wonders. Just look at what happen to airfares in the past decade; or, how easy you change your wireless phone provider just because you do not like the color of the recent poster of your current carrier.

I think it would be better if the presidential candidates’ economists stop this amateurish philosophical bickering. Instead, they should start talking about real problems that matter to real people, like how to help small coffee farmers help themselves, or how to expedite the process of setting up a firm.

I am not a political analyst; so, I do not know whether this move would win more votes. But, the last time I checked, most Indonesians are either small farmers or workers in informal sectors.

Their sheer numbers – these are, I think, reasons enough to talk to them.

Riding on the back of consumption

2009-06-06T13:48:00.006+08:00

I wonder why the IMF raises Indonesia's 2009 economic growth forecast from 2.5% to 3-4%.

So, I look at the latest BPS Press Release on Indonesia's economy, and find that the economy grows by 4.4% in the first quarter. Unsurprisingly, Government Expenditure has been growing by almost 20% during this election season, which helps boosting growth. But, Private Consumption is also going strong, expanding almost 6% in the first quarter.

Indonesia's Economic Growth (First Quarter 2009)

Despite the 24% fall in imports. Pretty impressive!

Six point one percent

2008-05-07T09:55:00.003+08:00

The economy grew at a lesser rate in the first quarter of 2008, compared to in last year's fourth quarter, on a slower growth in investment and consumption amid rising inflation and a global economic slowdown, Bank Indonesia (BI) said Monday.

In its quarterly assessment, BI estimated the economy had grown 6.1 percent in the first three months of 2008, lower than the government's estimate of between 6.2 and 6.3 percent.

A growth rate of 6.1 percent is pretty good, I would say.

Asian Rice Laws

2008-04-21T20:45:00.002+08:00

"[Asian] Rice laws and regulations are going in the wrong direction. It takes one back to the British Corn Laws," says [Steve] Hanke.

"These mandated the virtually complete government regulation of British agriculture at the start of the nineteenth century.

"Fortunately, that yoke was removed in 1846. Thanks to the efforts of Richard Cobden, John Bright and the Anti-Corn Law League, the Corn Laws were repealed.

"This resulted in the promotion of free trade, the importation of cheap food and a major surge in British standards of living.

"What rice needs today isn’t more government meddling but a modern version of the Anti-Corn Law League."

That's Steve Hanke of the University of Baltimore

The rise of rice price

2008-04-18T14:51:00.004+08:00

Last January, the price of rice future for December delivery was about $13. Today, it is more than $20. And, for next year delivery, the price of rice remains high.

^{Rough Rice Future (Yahoo! Finance on April 18, 2008)}

So, if rice traders' perception is any guide, it is going to be a bumpy ride ahead for the Indonesia's poor.

Indonesia in pictures: Porridge seller

2008-04-10T13:05:00.002+08:00

Street vendor selling porridge © hennyriedmueller

Good news!

2008-04-07T09:52:00.005+08:00

Indonesia's economic growth is forecast at 6 per cent this year, down from 6.4 per cent predicted earlier, in line with a slowing of the country's exports sparked by a world economic slowdown, the World Bank said on Tuesday...

However, it predicted Indonesia's economy growth would rise to 6.4 per cent in 2009...

Despite the slowing global economy, in 2007 Indonesia's economic growth accelerated to a 10-year high of 6.3 per cent, the World Bank said.

"This growth rate reduced (Indonesia's) poverty rate from 17.8 per cent (in 2006) to 16.6 per cent (in 2007), based on the government's poverty line," it said.

The growth rate also reversed the recent trend toward jobless growth by causing unemployment to fall from 10.3 per cent to 9.1 per cent.

This is good news; and it is from the World Bank, which often offers gloomy prediction of Indonesia's economic growth.

I am not a macroeconomist, but I am willing to bet that the economy this year will grow faster than 6 percent, maybe close to last year's growth rate of 6.3 percent.

Malnutrition makes you less educated

2007-12-12T14:16:00.000+08:00

In Indonesia, more than 30% of children under the age of 5 years suffer from chronic malnourishment. The long-term consequences of childhood malnutrition are well established in the literature. Yet, little is known about the extent to which these children are able to recover from some of the long-term deficits in health outcomes caused by childhood undernourishment. To capture the association between nutritional deficiency at young ages and subsequent health status, a panel data is constructed using observations on children between the age of 3 and 59 months in 1993 who are followed through the 1997 and 2000 waves of the Indonesian Family Life Survey. A dynamic conditional health demand function is estimated, where the coefficient on the one-period lagged health status captures the extent of recovery, if any, from childhood malnutrition. This coefficient is also known as the ‘catch-up’ term. ... [A] coefficient of 0.23 estimated here indicates that by adolescence, a malnourished child will grow to be only 0.95 cm shorter than a well-nourished child...

That is Subha Mani of the University of Southern California in a recent job market paper. She concludes "poor nutrition at young ages will cause some, but not severe, retardation in the growth of future height indicating partial catch-up effects".

Once centimeter is still pretty large, I think. Besides, she also calculates that malnourished child will also have 0.6 less year of schooling.

Thanks to Arya Gaduh for the pointer.

Are Indonesia's poverty rates declining?

2007-10-27T12:14:00.000+08:00

An old post by Arya Gaduh of Nalar Ekonomi caught my attention. It is about Indonesia's latest poverty rates published by Statistics Indonesia (BPS): It reports that the number of Indonesian poor declines by 2.13 million, or about 1.2 percentage points (from 17.75% to 16.58%).

The fall is not statistically significant, however, as Arya correctly suggests.

A back of envelope calculation gives me a standard error of the difference in the poverty rates of about 2 percentage points. It is so large so that it may overwhelm the estimated difference.

It means we cannot really say whether the poverty rate last year (17.75%) is really different from the rate this year (16.58%).

In that sense, the BPS's press release is rather misleading. It reports that poverty rate declines, but it does not tell us the standard error of the fall.

It is as if BPS gets the number of the poor from the entire Indonesia's population, not from a small sample of it only.

Of course, I am glad to hear that poverty rate falls. But, at the same time, BPS should acknowledge that there is too much noise in the data. That we do not really have convincing evidence that poverty rate has actually declined.

Banks comply with capital requirements?

2007-09-22T16:43:00.000+08:00

Using dynamic panel data models, we examine the effect of capital requirement on banks’ behavior in Indonesia. We find inconclusive results. Banks tend to comply with capital requirement: They increase their capital ratio when their CAR is lower than, or falling towards, the eight percent regulatory minimum. However, most of our results are statistically significant at 20-30% level of significance only. Moreover, our results are mostly driven by private domestic banks and heavily-undercapitalized banks that were closely monitored by regulator in the aftermath of the 1998 crisis. Whether, in normal circumstances, banks in developing countries like Indonesia comply with capital requirement, therefore, remains questionable.

That's from another recent working paper by Parinduri and Riyanto. Comments and suggestions are welcome.

Indonesian economy grows faster

2007-08-18T14:58:00.000+08:00

Almost seven percent in the second quarter this year. If we exclude oil and gas sectors, that is.

Indonesia's economic growth (2002-2007)

Indonesia's economy as a whole grows by 6.3%, which is also quite good. But, the slower growth is because oil and gas sectors continue contracting.

If this seven percent growth translates into lower unemployment- and poverty rates, all would be very well.

Strategic sale works

2007-08-12T17:26:00.000+08:00

We examine the effect of strategic sale—the sale of banks to strategic foreign investors—on banks’ performance. The Government of Indonesia implemented such a policy as a part of bank restructuring in the aftermath of the 1998 banking crisis. Using difference-in-difference models, we find that strategic sale leads to 12%-15% cost reduction. These results are robust to the use of other estimators such as difference-in-difference matching-estimators and stochastic-frontier analysis, to that of other performance measures such as return on assets and net interest margin, and also to that of different types of samples. These suggest that strategic sale could play an important role in restructuring troubled banks in developing countries.

In short, the sale of Indonesian banks to strategic foreign investors a couple of years ago is a good thing.

That's from a recent working paper by Parinduri and Riyanto.

Indonesia's interest rate anomaly?

2007-07-14T11:27:00.000+08:00

"...[there is] an anomaly between the BI benchmark rate and bank deposit interest rates in Indonesia at present," the central bank governor [Burhanudin Abdullah] told the House of Representatives Financial Commission at a hearing which began Thursday evening and lasted Friday.

He said the anomaly lay in the fact that the BI rate (8.25 percent) was higher than the bank deposit rate of 5 percent.

"The BI benchmark rate should have been lower than the bank deposit interest rate," he added.

He may can call it an anomaly, but the higher Bank Indonesia benchmark rate is central bank's own policy choice.

It is the consequence of central bank's obsession to lower inflation rate by setting excessively high interest rate.

Semi-hiatus

2007-06-16T11:14:00.000+08:00

Regular readers may observe that I have been on unofficial semi-hiatus for the last couple of months. Unfortunately, now I need to have a long hiatus, perhaps for the rest of this year.

Stop by once every few months, though; I may write one post or two.

In the meantime, you can browse my categories of posts and archives, which are available in the sidebar.

The amazing comeback of Asian economies

2007-05-30T10:21:00.000+08:00

Economic recoveries are surprisingly fast, though I still believe that, if IMF did not require too tight fiscal and monetary policies, Indonesia's economic growth could have been even higher.

Economic Growth Rates

From Takatoshi Ito's paper on Asian Crisis; via Dani Rodrik's weblog.

Pirates of the East Indies

2007-05-27T17:10:00.000+08:00

In 2005, [the International Maritime Bureau] recorded 276 [pirate] attempts and attacks. In 2004, there were 329 and in 2003, 445 incidents. The IMB director, Pottengal Mukundan, said many incidents go unreported.

Indonesia, however, continues to be the world's piracy hotspot, recording 50 attacks in 2006 -- a drop from 79 the year before...

On April 16 of this year, 10 speedboats attacked a merchant ship in waters south of Indonesia, but failed to board the vessel. A month earlier, on March 14, in waters about 50 km east of Pulau Bintan, Indonesia, a tanker was not so fortunate when it was attacked by pirates riding two speedboats.

The tanker was boarded by 10 men dressed in camouflage and carrying shotguns, rifles and daggers. The pirates beat the ship's captain, tied up the crew and blindfolded them before damaging the ship's communication equipment and stealing cash, crew passports and telephones.

From the cnews.

Indonesians thank sparingly?

2007-05-18T08:44:00.000+08:00

Indonesians use terima kasih [thank you - RAP] and makasih only sparingly. When someone performs a routine service for someone else, they are often not thanked for it. In such situations, if you feel tempted to say terima kasih, you should try to replace it with some other way of acknowledgement, such as a nod.

Why do they thank sparingly? This seems to be linked to traditional values. Most Indonesians, especially Javanese, have a firm sense of social hierarchy and of status differences. So they are unlikely to thank a person of lower status in many everyday situations as they regard that person to be simply carrying out his or her social obligations.

That is according to Tim Hassall, an ANU's linguistics expert.

I have no evidence or statistics of any kind to offer (he'd better have), but I do not think Indonesians thank sparingly. I can say that I thank all the time, and so do most people I know of.

I do not buy his claim that most Indonesians "have a firm sense of social hierarchy and of status differences" either. I mean, does he really think Indonesians and, say, Australians are really different on this matter?

What do you think?

Gloomy forecasters, still

2007-05-16T12:37:00.000+08:00

Last year I commented on how gloomy forecasters' had been on Indonesia's economic growth. Guess what: They still are.

The average forecast of first quarter growth by a Dow Jones Newswires poll of 12 regional economists is 5.75 percent. The economy actually grows by 6 percent. On average, they miss the target by about 25 percentage points.

So, will all the glooms go away? Maybe not yet. As the good news about Indonesia's economy continues flowing, however, the forecasters would have to eventually turn about face.

I mean, it would embarrassing for them to consistently underestimate the strength of Indonesia's economy, right?

Indonesia's giant state firms

2007-05-15T10:17:00.000+08:00

Of the almost 140 companies that are majority-owned by the government, only 12 have been listed on the [Jakarta Stock Exchange]. However, these 12 account for nearly 37 percent... of total market capitalization...

That's how dominant these few state-owned enterprises have been in the Indonesia's stock market. The three largest are PT Telkom Indonesia, Bank BRI, and Bank Mandiri, which account for 28 percent of the market capitalization.

From the Jakarta Post's editorial, calling the government to privatize other state-owned firms.

Foxes ruled Indonesia's financial chicken coop

2007-05-07T09:18:00.000+08:00

[The deregulation of Indonesia's banking sector in the 1980s and 1990s] "opened the floodgates for local crony conglomerates to set up private banks and take in deposits from a trusting public."

With no rule of law, there was no oversight and no supervision, he said.

"The foxes were running wild in the financial chicken coop and no one, ...pressured the Indonesians to design safeguards to protect the public's deposits," he said. One result was the 1997-98 financial crisis "that plunged tens of millions into abject poverty."

That's Jeffrey Winters of Northwestern University's take on Indonesia's banking deregulation. The language, it is a bit too colorful for my taste. And, don't you think his assessment is over the top?

By the way, Winters is commenting on World Bank President Paul Wolfowitz role as U.S. ambassador to Indonesia in the 1980s.

Wages had not changed much?

2007-05-03T14:22:00.000+08:00

It's Labor Day. Workers claim that wages had not changed much. Which begs the question: compared to what?

Real wages in Indonesia (BPS)

Statistics of average real wages (total industri in the graph above) shows that since the 1998 crisis, real wages have been increasing at more than 7 percent per year, which double the real wages in 10-year time.

However, compared to the pre-crisis peak of real wages in 1997, current real wages are only about 20 percent higher, which may explain workers' claim. Moreover, in the last two years, real wages have been stagnating, if not declining.

And labors, of course, are not created equal. Cigarette factory workers (industri rokok) and garment workers (industri pakaian jadi) are among the winners, while ceramic workers (industri batu bata, ubin) are the losers.

The rich are getting richer?

2007-04-26T09:14:00.000+08:00

The "trends in top incomes does not suggest that there has been a sustained long-term increase in income inequality in Indonesia", Andrew Leigh and Pierre van der Eng conclude in a recent working paper.

In short, as Indonesia's economy grows, the rich do get richer. But so do the poor.

Income Share of the Top 10% in Indonesia (Figure 2 in the paper)

Hence, in the last two decades, the income share of the 10 percent richest remains pretty much the same, in the 35%-40% range.

GDP per capita of US$18,000 by 2030?

2007-04-24T15:45:00.000+08:00

That's the target of Indonesia Forum Foundation's 'Indonesia Vision 2030', which requires Indonesia's economy to grow by 7.26 percent annually.

Not an impossible goal, to say the least.

Indonesia's GDP per Capita

More likely though, Indonesia's economy would grow by about five percent per year so that GDP per capita PPP at constant 2000 international $ in 2030 will be about $12,000 (the red dotted line).

That would be quite excellent in itself, though, of course, the government could "easily" increase economic growth further.

Such as, by shredding some paper forms and closing some offices.

Indonesia in pictures: Bright future

2007-04-17T14:28:00.000+08:00

The bright future of Indonesia © thebigdurian

Balanced-budget zealotry no more?

2007-04-10T13:16:00.000+08:00

For 2008 next year, Indonesia assumes an economic growth target of 6.8% and a Budget deficit of 1.7% of GDP said Finance Minister, Sri Mulyani...

In 2007, however, the government’s budget deficit is expected to expand from 1.1% of GDP (or Rp. 40.5 trillion) to between 1.2% to 2% (or an estimated Rp. 60 trillion to Rp. 65 trillion), whereas government’s revenue is expected to reach Rp. 723.1 trillion, and government spending Rp. 763.6 trillion.

This increase was caused by added government spending to assist and recover from the many natural disasters, as well as the increased payments on subsidies carried over from last year. Over the past three years, spending by government agencies has continuously increased, and it is hoped that with increased government spending this will accelerate economic growth, reported Bisnis Indonesia.

That looks like a sensible policy. Perhaps, we can say that gone are the days of balanced-budget zealotry.

From Wuryastuti Sunario's Indonesia Digest.

Gus Dur: Indonesia needs more democracy

2007-04-08T14:18:00.000+08:00

[Abdurrahman Wahid] also believes that the "only solution" to the challenge of Islamic radicalization in Indonesia is more democracy. But what about the example of Hamas, which came to power through democratic means, and of other groups like Egypt's Muslim Brotherhood that would probably do the same if given the chance? Mr. Wahid's answer is to distinguish between what he calls "full democratization" and the "hollow imitation of democracy" that he sees taking place in Indonesia as well as among Arabs in Palestine and Iraq.

"The problem is not personalities, it is institutions," he says. "For the past 250 years the Americans have had not just Jefferson's concept of the rights of the individual but also Alexander Hamilton's belief in a strong state." In order to function properly, democracy requires competent government that can effectively uphold the rule of law. It also requires a broadly understood concept of self-rule, which is missing in too much of the developing world: "Here, ordinary citizens expect the government to do everything for them."

From The Wall Street Journal.

Boediono, the optimist

2007-03-28T09:05:00.000+08:00

And it is a good thing too. He used to be, I think, very conservative. All he always talked about was macroeconomic stability. His mantra was low inflation and balanced budget. Only recently he starts putting more attention to unemployment, Indonesia's most depressing economic problem.

Jakarta Post reports:

The government sees economic growth of 6.8 percent in 2008, with inflation between 5.6 and 6 percent, the coordinating minister for the economy [Boediono] said Monday...

Boediono said the economy has improved since the second and third quarters of last year, and the government had put into place policies to further push the economy.

With more relaxed monetary policies, effective fiscal management and an improved investment climate, he said the growth target could be achieved.

"We have to be optimistic. There's no reason to be pessimistic," he said.

Scholarship program works

2007-03-26T17:23:00.000+08:00

Scholarship programme of the 1998 Social Safety Net prevents enrollment in primary school from falling, Robert Sparrow concludes in a recently published paper. The program has little effect on enrollment in secondary school, however.

Here is the abstract:

This paper analyses the impact of an Indonesian scholarship programme, which was implemented in 1998 to preserve access to education for the poor during the economic crisis. Scholarships were targeted pro-poor and the allocation process followed a decentralized design, involving both geographic and individual targeting. The identification strategy exploits this decentralized structure, relying on instrumental variables constructed from regional mistargeting at the initial phase of allocation. The programme has increased enrolment, especially for primary school-aged children from poor rural households. Moreover, the scholarships seem to have assisted households in smoothing consumption during the crisis, relieving pressure on households’ investments in education and utilization of child labour.

Indonesia is a deeply religious country?

2007-03-20T13:55:00.000+08:00

The inescapable "big picture" is that Indonesia is a deeply religious country, with [according to Roy Morgan Single Source] almost three out of four people going "regularly to my place of worship". Almost the same number believes that "homosexuality is immoral".

That's Debnath Guharoy of Roy Morgan in Jakarta Post.

He may be right, Indonesians are religious. I mean, if we define religiosity in terms of church attendance and the belief on the immorality of homosexuality.

The thing is, I am not convinced that these two have a lot to do with the religiosity.

One of the reasons why statistics show proportionately more Indonesians attend mosque regularly, I speculate, is because the majority of Indonesians live in rural areas. In villages, people have just to attend Friday prayers if they don't want to be outcasts.

Comparing church or mosque attendance in Indonesia's large cities and that in US, for example, would perhaps make more sense. But then, using Roy Morgan's definition, I suspect that we would find the populations of Indonesia's large cities are not more religious than average Americans.

Defending the belief on the immorality of homosexuality as an indicator of religiosity, I think, is not easy either. It's true that, in many muslim countries, people consider homosexuality as immoral. So, he may hastily concludes that that is because those muslims are religious. But, a lot of Indians, Vietnamese, South Korean, Africans, Ukrainian and Russians also consider homosexuality as unacceptable. And I have yet to hear that somebody says South Koreans or Russians are deeply religious.

So, is Indonesia a deeply religious country? I don't know. But, to say one way or the other, you have to offer a more convincing evidence.

Indonesia is the most risky economy?

2007-02-27T15:51:00.000+08:00

Political and Economic Risk Consultancy, which polls expatriate business people, rates Indonesia as the most risky economy among the 12 Asian countries surveyed.

That is not surprising -- Indonesia is often ranked the worst by many pollsters. What I find curious is this: Despite the military coup in Thailand and several policy flip-flops by the junta, business people still think that Indonesia is worse than Thailand.

See for yourself the titles of PERC's own recent report on Thailand, which are not that rosy at all, as follows:

January 2007 Missteps by the junta are hurting foreign investor confidence
December 2006 Thai risks take a sharp turn for the worse
November 2006 Risks are down, but the junta is drifting
October 2006 No radical policy changes despite coup
September 2006 Coup breaks political stalemate but results in new risks
August 2006 Disruptive political transition risks and violence in the south
July 2006 Political stalemate is keeping risks high
June 2006 Coup rumors are mounting
May 2006 Thailand is facing months of political drift
April 2006 Deteriorating domestic politics and a weak institutional structure
March 2006 Thaksin is down but not yet really out
February 2006 Risks rise due to political strife

So, does it mean Indonesia's economy is that bad?

Indonesia in pictures: Plaster quarry worker

2007-02-16T13:26:00.000+08:00

Plaster quarry worker © dæxus

The economics of loan sharking

2007-02-15T09:16:00.000+08:00

Loan sharks charge about 70 percent per annum for loans as small as Rp 500,000 (about US$55), with payment terms being weekly.

Why aren't these loan sharks being sidelined by new competition (i.e., from the banks or other formal institutions)? The main barrier to the entry of competitors is probably high operating costs. If one were to employ a debt collector to go around and collect weekly payments, this would obviously be costly.

Assume a villager borrows Rp 500,000 for three months. Twelve payments at an interest rate of 70 percent a year would require installments of around Rp 45,000 per week, and interest income earned for three months would amount to Rp 44,800.

Even under a rosy scenario where the creditor hires an employee to visit seven customers per day, six days a week, he will only take in close to Rp 1.9 million per month from some 42 clients. In practice, the collector's wages, transportation costs and bad debts would have to be deducted from this amount, leaving a minimal margin for the creditor.

So, loan sharking is not that profitable after all. Not to mention that loan sharks have to bear the stigma people cast on them. And they are facing an even tougher competition from BRI and other microfinance institutions. That's Ari Pitoyo in Jakarta Post.

The fifteen billion dollar question

2007-02-14T13:56:00.000+08:00

IndCoup rebukes World Bank’s country director for Indonesia, Andrew Steer:

...[he] comes up with a report that "opportunity knocks for Indonesia" cos the country has an extra US$15 billion to spend this year. This additional US$15 billion means, in the World Bank’s own words, that "a revolution is underway in Indonesia's finances, creating immense opportunity for a better future".

Hahaha! What utter trite. And it just goes to show how incredibly weak the World Bank’s analytical abilities really are.

Yep US$15 billion is a lot of money. If it belongs to one man. But if it has to be shared by the 220 million people in Indonesia, then you are looking at an additional US$68 per person per year, or a little over US$1 per person per week! Just about enough to buy a large bottle of Bintang every Saturday night. But if the World Bank believes that’s enough to "greatly influence and accelerate the country's development over the next decade" then I really think they’ve got their heads in the sand. Don’t you?

I share IndCoup's concern, but, for Indonesia, that $68 per person per year are actually quite large -- it's about six percent of Indonesia's GDP, and almost one-fifth of government's budget. Spending this $68 per person per year on basic education, public health, and rural infrastructure would certainly invigorate Indonesia's economy.

The question we should ask, I think, is this: Are the $15 billion per year, and the conservative fiscal stance adopted by the government in the aftermath of the 1998 crises that made it possible, worth the slower economic growth and higher unemployment rates we have experienced in the last eight years?

Indonesia's bird flu virus for sale

2007-02-08T08:54:00.000+08:00

Indonesia, which has had more human cases of avian flu than any other country, has stopped sending samples of the virus to the World Health Organization, apparently because it is negotiating a contract to sell the samples to an American vaccine company, a W.H.O. official said yesterday. ...

"[Indonesia's] concern," Dr. Heymann said, is that their strains have been used by several manufacturers to produce vaccines, and that Indonesia should get some compensation. From their point of view, it's understandable."

...with the threat of a lethal flu looming and with Western companies able to produce enough vaccine each year for less than a quarter of the world, Indonesia is trying to secure an affordable supply for its people.

I can only say, Wow! That's certainly a bold move. From the New York Times.

One in two Indonesia's villages is poor

2007-02-06T11:13:00.000+08:00

We have identified that 32,000 out of the total 70,600 villages are underdeveloped and lack basic infrastructure and facilities, including in the education and health sectors. We could also say that the unemployment rate and poverty level in those regions are higher than the national rate.

Our target is to reduce the number of underdeveloped villages by about 15 percent by 2010.

That's Saifullah Yusuf, the State Minister for the Development of Disadvantaged Regions.

How to preserve Indonesia's forest?

2007-01-31T12:29:00.000+08:00

Recompense the costs of forgone opportunity from exploiting our forests, says Rachmat Witoelar, the environment minister.

"Preserving our forest means we can't exploit it for our economic benefits. We can't build roads or mines," Witoelar said. "But we make an important contribution to the world by providing oxygen. Therefore countries like Indonesia and Brazil should be compensated by developed countries for preserving their resources," he said.

Why do interest rates remain high?

2007-01-29T09:59:00.000+08:00

Bank Indonesia has cut its benchmark rate since April last year. But why do interest rates on loans and deposits remain high?

Interest rates (Source: BI)

I find this puzzling. As far as I can see, inflation has always been low. So, it's not that inflation would increase. And, I don't think Indonesia's business risks change much in the last two years. If anything, the economy is getting better.

Even at a conservative expected inflation rate of 7 percent, real interest rates on loans are now more than 8 percent. That is perhaps too high, don't you think?

Indonesia may surpass US' economy too

2007-01-26T10:42:00.000+08:00

Fellow bloggers at Indonesia Anonymus worry that Indonesians would just be spectators to the rise of China and India as the new world's economic powerhouses: China and India would surpass US' economy by 2035 and 2050 respectively.

Ratio of country's GDP to Indonesia's GDP

The truth is this: If history is any guide and Indonesia continues growing 5-7 percent per year, Indonesia may surpass US' economy too, though perhaps much later than China would. In the 1970s, US' economy is about 30 times as large as Indonesia (at PPP, current international $); three decades later the figure falls to 15. Indonesia is also catching up with Japan: 11 times as large in the 1970s, now Japan is only five times as large as Indonesia.

China's rise is no doubt amazing, and Indonesia's growth pales in comparison to that. India is perhaps less impressive than forecasters tell us: In the last three decades India's economy has always been less than five times the size of Indonesia's economy.

Anyway, how do we respond to China's rise? Indonesia Anonymus suggests that what we need is a kind of long-term development plan, which may be a good thing. I mean, if the government could really devise such a plan and then implement it.

But, let me offer an "easy" shortcut to Indonesia's prosperity: Cut red tapes, leave entrepreneurs alone, and let them create jobs.

As I have always said, all we need to do are shredding some paper forms and closing some offices. Nothing would be easier than that.

Indonesia is prone to disaster?

2007-01-24T10:03:00.000+08:00

You google news on Indonesia, and chances are you would find gloomy stories about quake, tsunami, flood, plane crash, landslide, terror attacks -- as if Indonesia is the most disaster-prone country in the world.

The truth is, in the last three decades, less than two Indonesians per thousand people per year have been affected by disasters -- much smaller than, say, that of the Phillipines (28), Thailand (23), or Australia (27).

Affected by Disasters (1975-2004) © Worldmapper

So, perhaps disaster is one of the things that we should not worry about too much.

Banks do not extend enough loans?

2007-01-22T09:21:00.000+08:00

Indonesia's banks are used to extend loans so much so that their loan to deposit ratio (LDR) is more than 100%. In the aftermath of the 1998 crisis, however, LDR falls sharply. It has increased gradually, though it seems that it peaks at 60%.

Loans to deposit ratio of Indonesia's banking industry (Source: BI)

Is this healthy? Some politicians and analysts say no, and the central bank seems to agree with them.

If you ask me, I don't know. Obviously there are reasons why banks refuse to extend more loans. Besides, what is the optimal LDR? Do we really want banks to return to their pre-crisis LDR? Isn't that too risky?

Indonesia is mostly unfree

2007-01-18T09:59:00.000+08:00

In the latest edition of Index of Economic Freedom, Indonesia is ranked 110 out of 157 countries surveyed, one of the worst in the region. Here is a summary:

Indonesia scores well in fiscal freedom, freedom from government, and labor freedom. The top income tax rate is high, but corporate tax rates are moderate. Government expenditures are fairly low, and state-owned businesses do not account for a significant portion of total revenues. The labor market operates under somewhat flexible conditions, but employing and firing workers can be costly.

Indonesia is weak in business freedom, investment freedom, financial freedom, property rights, and freedom from corruption. Starting a business takes twice as long as the world average, and regulations are onerous. Foreign investment is restricted, and judicial enforcement is both erratic and non-transparent in its treatment of foreigners. Because corruption is rampant, impartial adjudication of cases is not guaranteed.

That means we do not have the freedom to mind our own business as much as our neighbours have: to trade with one another, to look for jobs, to hire and fire workers, to enjoy the fruits of our own efforts. I guess we have just to remember this the next time we celebrate our independence day.

Inflation and poverty, revisited

2007-01-17T09:06:00.000+08:00

Last week I wrote about whether the adverse effect of inflation (through the changes in poverty line) on Indonesia's poverty rate is as large as some people have suggested. Somehow it spurs a rather heated debate, or perhaps a little misunderstanding. So, now let me revisit the issue.

(If you are not following the discussion, you may scroll down or browse my archive; just in case you find other posts of interest.)

In essence, I think, the debate boils down to what the following graph is about.

As far as I understand it, the graph does not show any relationships between poverty rate and poverty line. It is merely the cumulative distribution function (cdf) of monthly expenditure (which is indexed by the 2006 poverty line). There is only one variable in the graph, that is monthly expenditure. Therefore, the graph cannot tell us "how sensitive the poverty rate is to increases in the poverty line". The graph is not a plot of "poverty rate against the poverty line".

If anything, the graph shows the poverty rate in 2006 only (given the prices of goods and services in 2006). In other words, it tells us one point on the "poverty rate - poverty line curve" (if we insist on having such a curve).

If poverty line changes (because of inflation), then we cannot use the above green curve anymore because the distribution of monthly expenditure would also change. For example, it is likely that, if there is inflation, nominal income would increase and the curve would shift to the right. (This little conversation of a blogger with a ~~street~~ vendor may illustrate the idea.)

So, based on the graph, I wonder whether we can say that "a 10-percent increase from the current poverty line (which presumably caused by inflation) will result in a 30% increase in the number of poor". Hence my question: "Inflation may increase poverty rate, but is the effect of inflation that large?".

That' all there is to it. There is nothing deep here. We don't need to appeal to fancy theory. Because the statement of interest is quite general, looking at recent statistics on prices is also not necessary. The essence of my previous post is about the graph, and what it tells us.

Industrialization is bad for infants?

2007-01-15T16:40:00.000+08:00

The more advanced a region industrializes, the (slightly) higher infant mortality is. That's according to Maya Federman of Pitzer College and David Levine of the University of California, Berkeley, in a working paper. Here is the abstract:

... This study examines the effects of growing manufacturing employment on infant mortality across 274 Indonesian districts from 1985 to 1995, a time of rapid industrialization. Compared with cross-national studies we have a larger sample size of regions, more consistent data definitions, and better checks for causality and specification. We can also explore the causal mechanisms underlying our correlations. Overall the results suggest manufacturing employment raised living standards, housing quality, and reduced cooking with wood and coal, which helped reduce infant mortality. At the same time, pollution from factories appears quite harmful to infants. The overall effect was slightly higher infant mortality in regions that experienced greater industrialization.

Fifty-seven bird-flu deaths, and counting

2007-01-12T08:52:00.000+08:00

The last time I wrote about bird flu in July last year, there were 42 bird-flu deaths. Now, six months later, we have the 57th.

And we are not out of the woods yet: Two new cases of bird flu are recently confirmed, bringing Indonesia's total to 76 human cases of bird flu.

Indonesia in pictures: Seaweed farmer

2007-01-11T08:56:00.000+08:00

Bu © Farl

Indonesia's future is bright

2007-01-09T14:13:00.000+08:00

Indonesia in 2006 enjoyed more stability, more well-being and more peace than at any time in more than sixty years of independence. The future looks bright and quite apart from the obvious benefits enjoyed by the Indonesian people, the wider world should expect to see Indonesia playing a more active role as a concerned global citizen.

Bold as it is, this statement is aimed at dispelling some of the lingering perceptions about Indonesia's potential to fail. Such perceptions are misplaced and represent more than anything else the habitual pessimism of Indonesia watchers and many Indonesians themselves who have yet to wake up to the full potential of Indonesia's new found stability.

That "the habitual pessimism of Indonesia watchers and many Indonesians themselves" are unwarranted, I couldn't agree more.

That's Michael Vatikiotis of the Institute of Southeast Asian Studies

Can the government enforce safety regulation?

2007-01-08T16:47:00.000+08:00

Preliminary investigations [of the sinking Senopati Nusantara ferry] indicate more lives could have been saved if safety regulations had been properly observed on board, officials have said.

Under the 1992 Law of the Sea in Indonesia, captains are responsible for the safety and security of ships and their passengers.

Harbor masters are supposed to scrutinize ships sailing permits and seaworthiness.

They are also supposed to check ships' nautical equipment, radios, total loads, passenger numbers and crew.

Captains granted permits must sail within 24 hours or apply for new documents.

So, everybody knows that safety regulation is in place; some shipping companies just do not observe it, and the government does not enforce it.

What to do? Demand the government to enforce the safety regulation? (Sure, we could do that.) But, in the foreseeable future, do you think the government is capable of enforcing the regulation? (I doubt it.)

Inflation raises poverty rate?

2007-01-05T14:53:00.000+08:00

Arya of "On Indonesia and the economy" suggests so. His argument goes something like this: Inflation determines poverty lines, and higher poverty line leads to higher poverty rate. In other words, inflation raises poverty rate.

Moreover, the effect of inflation is large. He writes:

What [the figure below] shows is that Indonesia’s poverty rate is sensitive to poverty-line movements. A slight increase goes a long way: a 10-percent increase from the current poverty line will result in a 30% increase in the number of poor to 50.8 million people (i.e., a 23.1% poverty rate).

But, if poverty line increases because of inflation, then we cannot use the graph anymore, right? I mean, because general prices increase, the (nominal) income of the population would increase too so that the green curve may shift to the right. This is particularly relevant for the poor because many, if not most, of the poor work in informal sectors.

My point is this: Inflation may increase poverty rate, but is the effect of inflation that large?

Competition leads to more airline accidents?

2007-01-04T09:29:00.001+08:00

Aco of Exegesis writes

... Some people have started to blame the high competition in air plane business as the root cause of this and other accidents. According to them, the low cost carriers have been pushing their costs to the limit while risking the safety. So, the government should re-regulate the market.

It is true that low air fare might come with low safety level. But that is not an issue of competition. Rather, it is an issue of imposing and enforcing safety standard.

Tougher competition in recent years may have lowered the quality of Indonesia's airline services. Theory also suggests it could.

Having said that, lower quality is of course not necessarily a bad thing. For example, not so long ago, middle-income earners had to endure 48-hour-bus-drive traveling from Jakarta to Medan. Now, by flying budget airline, they could arrive in Polonia in just a few hours, at about the same price.

Low quality airliner is still much better than high quality inter-city buses.

A more important question is this: Does deregulation of airline industry lead to more transportation fatality? I do not have the statistics with me, but I had ridden those inter-city buses many times and I can tell you that traveling in those buses are scary.

Back to Aco's post: Let's just face it, lower airline safety is the consequence of competition. Besides, how good do we expect the government enforces the safety regulation?

Begging in Indonesia pays

2006-12-20T15:13:00.000+08:00

"The more people pay, the more the beggars are encouraged to stay," [Wiwik of the Social Department in Surabaya] said. "Please don’t give them money." ...

"Our public order staff pick them up and take them to our centre where they can be held for three days," Wiwik said.

"We check their identities and see what the problems are. About 90 per cent come from towns outside Surabaya, so we give them a ticket to return home. If they’re from Surabaya and fit for work we try to train them so they can get jobs as pedicab drivers or gardeners.

"If they come back to Surabaya three times after being warned away we call the police. They’re arrested and jailed for three months.

"But even this doesn’t always work as prison provides food, a bed and shelter that’s often much better than the life they’re living on the streets."

That's Duncan Graham of Indonesia Now. Apparently, beggars could earn around Rp 30,000 (US $3) a day on average. It does not seem like much, but in a country where many people earn less than $2 a day like Indonesia, begging does pay.

Indonesia's unemployment falls by one million

2006-12-18T09:24:00.000+08:00

Says President Susilo Bambang Yudhoyono, referring to unemployment statistics in the last two years, highlighting the fact that unemployment rate falls for the first time during his administration.

Employment statistics (million people)

What he does not say is this: The fall in the number of unemployed people is not only because the increase in employment (1.5 million people), but also because an even larger increase in the number of people who are not in the labor force (1.8 million).

Presumably, many of these 1.8 million people are discouraged workers, those who are tired looking for jobs, give up searching, and exit the labor force entirely.

Now, that is not good news at all, Mr. President.

Sarapan Ekonomi is having a facelift

2006-12-16T16:09:00.000+08:00

I hope you like its leaner look, and easier navigation (A few people have just told me that they prefer the old template. Sigh).

Anyway, the idea is this: When 'Sarapan Ekonomi, pops up in your browser, you could skim the last few weeks worth of posts in just one look. Hence, Recent Posts, with brief summaries, in both sidebars. Archive in the standard drop-down menu as well as in Google Reader. The Label Cloud, the Search button, and the Recent Comments.

Moreover, 'Sarapan Ekonomi, is now fully in Blogger Beta, which means you can use Blogger's new features such as label feed and comment feed.

As far as I can see, it looks perfect in Firefox. In Internet Explorer, it looks OK. The only problem is that, in Internet Explorer, the Search button in the header of the page somehow disappears (That's why I add another Search button in the sidebar). I have yet to hear how it looks in other browsers.

Let me know what you think about 'Sarapan Ekonomi,'s new look, or if you find bugs or problems. For those of you CSS guru out there, if you know how to make my Search button in the header in Internet Explorer visible, please drop me a line or two. I would really appreciate it.

Have a great weekend!

Let's edit Wikipedia's Economy of Indonesia

2006-12-14T03:57:00.000+08:00

The first paragraph of Wikipedia's page on Indonesia's economy -- it's so lame and outdated!

Indonesia has a market-based economy in which the government plays a significant role. It owns more than 164 state-owned enterprises and administers prices on several basic goods, including fuel, rice, and electricity. In the aftermath of the financial and economic crisis that began in mid-1997, the government took custody of a significant portion of private sector assets through acquisition of nonperforming bank loans and corporate assets through the debt restructuring process.

Focus on the phrases in italic:

Is Indonesia's economy market-based? Yes, but so are many other countries. There's no point to state something that obvious -- certainly, not in the first sentence of the page.
The government plays a major role? I don't think so. Indonesia's government expenditure is less than 20 percent of GDP, which is small compared to those of many other countries.
The government owns many SOEs? That's true, but I don't think this information is important. The assets of Indonesia's SOEs are small compared to those of private sectors.
The government controls prices? Yes, but large part of subsidies on those goods have been slashed.
The government took custody of a significant portion of private sector assets? That's true, but it's not relevant anymore. The government has sold almost all of those assets.

So, it's time to edit Wikipedia's Economy of Indonesia page. Let's think of a better one-paragraph-summary of Indonesia's economy. Something like this one, perhaps?

Why did Indonesia's poverty rate increase?

2006-12-09T13:48:00.000+08:00

Because of an increase in rice price, says the World Bank. The fuel price hike was not "a major factor".

The 33 percent increase in rice prices between February 2005 and March 2006 mostly due to the ban on rice imports is the main reason that poverty rates have increased. Around three-quarters of the additional four million people falling into poverty during this period did so as a result of the rice price increase and, in addition, recent analysis indicates that the fuel price increase was not a major factor in the increased poverty rate. The unconditional cash transfer (UCT) program, which provided cash transfers to 19.2 million poor and near-poor households, more than offset, on average, the negative impact of the fuel price increase for the poor. In other words, the impact of the combined effects of the fuel price increase and the UCT compensation point to a net positive income gain, overall, for the poorest 20 percent of the population.

Hence, reducing poverty rate in Indonesia would be easy. As the World Bank recommends, the Government just need to get rid off the ban on rice imports.

I wish this were true.

Note: I'm back. It's been a long hiatus. First, good news: Those guys at Merdeka accepted me as their new contributor. Thank you, guys! The bad news is that I may continue my hiatus for another month. Regular blogging will return next January, I hope. Stop by once in a while, though. I may post once or twice a week in the meantime.

Poverty, Agriculture Economics, Indonesia

Indonesia will launch land reform

2006-10-16T09:47:00.001+08:00

Many questions remain unanswered, however. How will the government do it? Whose land the government is going to distribute to farmers? Will the government confiscate land from its current owners?

Here is a story in Jakarta Post.

Communications and Information Minister Sofyan Djalil said the government expects to distribute between three million and four million hectares of land to landless farmers throughout the country as part the national campaign.

"The land will all be distributed before the current tenure of the President ends in 2009," Sofyan said.

Sofyan said the size of land that would be distributed eclipsed the 1.2 million hectares given out in a land reform scheme in the early 1960s.

Agriculture Economics, Indonesia

Do many Indonesians go by a single name?

2006-10-11T10:12:00.000+08:00

Some foreign journalists think so.

But, is it true? How many Indonesians? Twenty percent of us? Forty percent?

If we have access to a representative sample of Indonesia's population, we could easily get a definitive answer. Unfortunately, I don't.

For now, I only have the list of names of my undergraduate classmates. And in fact, some of my classmates do go by a single name -- about nine percent of them.¹

The list is not a representative sample, of course. But, I don't think there are more than thirty percent of Indonesians who have one name only. If I have to guess, the figure is less than twenty percent. For the younger generation, it is definitely even less.

Addendum: Virtuallly all of my classmates whose name is single are Javanese or Sundanese. And among those who are neither Javanese nor Sundanese, only one person goes by single name.

Statistics Indonesia ¹Do note that, since the sample size is small, the margin error of the proportion is quite large.

Indonesia's yield of paddy is high

2006-10-02T14:21:00.000+08:00

Yield of paddy per hectare in Indonesia is quite high. Not as high as the yield of the fully mechanized and high-tech farming in US or Japan, but still Indonesia's is among the highest in the region.

Yield of paddy (Tonnes per Ha)¹

This seems to suggest that many Indonesian farmers are poor not so much because of low land productivity, but rather because they have small piece of land only, if at all.

Agriculture, Poverty, Statistics Economics, Indonesia

The root of Indonesia's high unemployment rate

2006-09-26T14:35:00.000+08:00

The unemployment rate has reached an alarming level since it has risen to double digits. Despite its fluctuating drops, the unemployment rate has remained high. According to National Statistics Bureau data, as of June 30, 2006, the unemployment rate stood at 10.6 percent, or 11.6 million of the 106 million-person workforce, a 2 percent increase on the 9.5 million of the end of 2005. Under-unemployment, or those working less than 35 hours a week, has exceeded 43 million.

The economic growth of almost 6 percent in 2005 could cover only the annual growth of 2.3 million new job seekers. The unemployment situation has been worsened by the an additional 5 million people becoming poor, raising the number of poor in Indonesia to 37 million in August this year.

Indonesia could be facing an unemployment boom along with all the possible social impacts in the coming years, unless its root problems are addressed and economic development is accelerated.

That's Manpower and Transmigration Minister Erman Suparno, interviewed by Jakarta Post.

And what is the root problem? Skill mismatch, he said. "The industries have offered numerous job opportunities but they cannot be filled because of the absence people or lack of competence".

Skill mismatch is obviously one of the reasons why Indonesia's unemployment rate is high, but is it a major problem?

I don't think so. Only a couple years ago, unemployment rate was about 5-6 percent. So, cyclical unemployment -- unemployment due to slower economic growth -- is still the real culprit.

Unemployment Economics, Indonesia

Lower enrollment rates at secondary school

2006-09-20T12:03:00.000+08:00

Almost all Indonesian children attend six years of schooling, and 80 percent of even the poorest complete primary levels. Then, however, enrollments drop dramatically, especially for the poor.

That's from World Development Report 2007.

Education Economics, Indonesia

How poor farmers can escape poverty?

2006-09-18T14:52:00.000+08:00

Perhaps, there are only two ways: By producing more rice (say, by planting higher yield seeds, or employing high-intensive farming), or by working in the more productive non-farm enterprises (say, by working as small traders, street vendors, manufacturing workers, or construction workers).¹

None of these are quite feasible for the typical small and landless farmers, however.

As far as I know, new high yield varieties of rice are rarely to come by nowadays. Besides, yield of paddy in Indonesia has been quite high already, in fact among the highest in the region. Secondly, since many farmers have small or no land in the first place, high intensive farming is out of question. Thirdly, many farmers have no capital or skills (other than farming), so they would have no chance to work in the more productive manufacturing or trading sectors.

I am not saying that all poor farmers are going to stay poor forever. If they have some capital or skills, however meager, to work in non-farm sectors, they may get more income to supplement their seasonal paddy harvest.

Government surely could help non-farm enterprises to grow and flourish, among others by simply standing out of the way.

Still, our biggest hope is basic education. In the long term, that is. On the children of these farmers.

If these children get adequate education, say graduated from secondary school, they would have more opportunities to work in modern non-farm sectors, and live a lot more decently than their parents.

Poverty, Agriculture Economics, Indonesia ¹I write this post after having a small discussion about how poor farmers can escape poverty here.

God meant Indonesia for free trade

2006-09-14T14:01:00.000+08:00

Those are the words of an "early observer" of Indonesia's economy, quoted by C. Peter Timmer. Timmer further explains:

Because of the country's long and porous coastline, close to several major rice exporting ports, it is nearly impossible for Indonesia’s domestic rice price to be kept substantially above or below prices in those ports for extended periods of time.

World rice prices and domestic rice prices, 1985 to 2002¹

That is the hard truth, whether you like it or not.

Trade, Rice Economics, Indonesia ¹ The graph is from Figure 3 of Timmer's working paper. He takes the graph from Peter Rosner's.

Lending to the world at low real rates

2006-09-11T20:07:00.000+08:00

[Lawrence Summers] claims that the flow of capital today is exactly the opposite of what the "International Financial Architecture" had in mind after the World War. Today we see a net flow of capital from the poorer to the richer countries. In particular, large amounts from developing countries are being accumulated as reserves in US Treasury Bonds.

The problem is, Summers says, the real rate of return of US Treasury Bonds is close to nothing.

The gap between the return obtained at a typical central bank or what could be obtained with a typical pension portfolio or in stock is around 4% or 5% respectively (this gap would be of around 10% if compared to the return of Harvard’s endowment while he was President).

Therefore, we have some of the most rapidly growing economies in the world, with high percentages of their populations living in poverty, with a "fair amount of money deployed in clearly suboptimal investment".

That's from Poverty & Growth Blog.

Bank Indonesia says that our foreign exchange reserve may reach US$ 43 billion by the end of this year. As we continue exporting more goods and services than we import them from the rest of the world, we would continue lending more and more money to the rest of the world.

How ironic: Indonesia -- an investment hungry country -- is lending more and more money to the developed world at a very low real interest rate.

As Summers suggests, investing this huge amount of money in assets like US Treasury Bonds means that, at 4-5% lower rate of return, we may loose potential gain as much as a few billion US dollars per year.

It may not seem like a large sum of money, but it's actually sufficient to cover the 2007 budget deficit.

Macroeconomy, Reserve Economics, Indonesia

Indonesia's rank on ease of doing business falls

2006-09-06T14:25:00.000+08:00

World Bank's Doing Business just released its new report. Singapore is ranked first, Thailand 18^th, Malaysia 25^th, Vietnam 104^th, and Philippines 126^th.

Indonesia? We are at 135^th among 175 countries surveyed, falling four places from 131^th last year.

Indonesia's rank on ease of doing business in 2006 and 2005

In fact, on almost all aspects of doing business surveyed, Indonesia's ranks fall.¹

So, Mr. President, where is the reform you have promised us all along? Is it all just a hype?

Via PSD Blog.

Regulation Economics, Indonesia ¹It's not that doing business in Indonesia is now more difficult. In fact, starting a business now is a bit easier, while dealing with licenses, employing workers, registering property, and others are pretty much as difficult as in 2005. The problem is other countries improve their business environment a lot better.

Most poor remain poor

2006-09-04T11:30:00.000+08:00

Poverty rate is 18 percent, BPS announced. It increases from 16 percent last year.

An additional four million people fall into poverty, which means now almost 40 million of Indonesians are poor. And, on top of that, another 29 million Indonesians are almost poor.

Looking at how the poor move into and out of poverty, the picture is even grimmer.

Mobility of the poor, Feb. 2005-March 2006, (percent)¹

Almost 6 out of 10 poor in 2005 remain poor (the red figure). Moreover, almost 1 in 3 of those who were almost poor in 2005 fall into poverty, and so do another 12 percent of the almost not-poor and 2 percent of the not-poor (the purple ones). Secondly, 1 in 5 non-poor in 2005 becomes almost not-poor in 2006 (the brown one).

Perhaps, the only good news is this: About 4 out of 10 poor in 2005 have now graduated from poverty (the green figures), mostly into almost poor and almost not-poor categories.

I don't know for sure what this statistics tells us about how effective the government direct -cash-transfer to the poor after the huge energy-subsidy-cut last year is. But, the bottomline is this: the cash transfer helps some poor, but it leaves 6 out 10 poor remain poor. Moreover, many of those who were not poor last year now fall into poverty.

Poverty Economics, Indonesia ¹Source: Table 3 of the BPS' Press Release. BPS defines poverty as follows: Poor (those whose monthly expenditure is less than Rp 152,847 (about US$17), the Poverty Line (PL)), almost poor (1.00-1.25 PL), almost not-poor (1.25-1.50 PL), not-poor (more than 1.50 PL).

Indonesia in pictures: Tending paddy

2006-09-01T18:03:00.000+08:00

Whispers in the Field 3 © Brandon Hoover of Javajive

Pictures Indonesia in Pictures

Asia Blog Awards

2006-08-31T10:59:00.000+08:00

'Sarapan Ekonomi, is nominated for the Best Asia Biz/Econ Blog in the Asia Blog Awards.

These are the rest of the nominees: Chief Asia Inspector, China Law Blog, Go Figure, Indian Economy, Indian Raj, IP Dragon, South Asia Biz, and Walter Hutchens.

They are good! So, look around, and vote for whichever you like.

Addendum: I should have said that, unfortunately, I am right now on semi-hiatus, possibly for a couple of more weeks. In the meantime, you can browse my categories of posts, popular posts, or archives. The popular posts and archives are in Google Reader.

Do note also that, since I am migrating to Blogger Beta, some features in this blog may not work perfectly.

Blogging Asia Blog Awards

Vendors on Jakarta's buses

2006-08-31T08:26:00.000+08:00

Vendors in Jakarta are everywhere, including aboard public transportation like buses.

When he boards a bus, a vendor quickly passes his goods around the passengers for a quick look. Then he stands at the head of the vehicle and begins his sales spiel. The whole process takes around 10 minutes. Once you return an item, there is no second chance.

Hence Gita Hastarika's of Jakarta Post tips: "There is no time to think twice -- if you like it, buy it".

They sell virtually everything: fried tofu, candies, magazines, knives, "razors, a hand massaging machine, stickers of cartoon characters, primbon (religious chant books), toy ships, pirated VCDs, cellular phone vouchers, coloring-in books, donuts, flashlights, crackers, power glue, towels, socks and on and on and on".

And some of them are quite entertaining too.

This hugely varied stock is amusing and the vendors themselves usually put on quite a show, so if nothing else it's a nice distraction while sitting in heavy congestion on Sudirman.

Markets, SME Economics, Indonesia

How gloomy is Indonesia's growth forecast?

2006-08-30T15:34:00.000+08:00

Very gloomy. Since the 1998 recession, forecasters have been very pessimistic about Indonesia's economic growth.

For example, let's take a look at IMF's forecasts since 2001, published in its World Economic Outlook Databases April edition.

Indonesia's actual economic growth and IMF's forecast (percent)¹

The blue line is IMF's forecast. It has always been missed the actual economic growth (the red line) from below.

Forecasting economic growth is difficult, all right. But, if IMF consistently underestimates Indonesia's economic growth for six consecutive years, I guess there must be something wrong with IMF's model of Indonesia's economy.²

What about Indonesian economists? Many of them are even more pessimistic than IMF. And it also depends on which groups of economists that you are talking to, like whether they are hired by the government or not. But it perhaps could be the subject of future post.

Growth, Macroeconomy Economics, Indonesia ¹IMF's forecast is from World Economic Outlook Databases April edition from 2001-2006. Actual economic growth is from Bank Indonesia and BPS. ²Indonesia's economy grows 5 percent in the first semester this year. Almost certainly, economic growth this year is more than 5 percent, the IMF's forecast. Note also that IMF publishes this forecasts in April, so they may have known a few things about what has been going on in the economy for the first quarter of the year.

Indonesian muslims are 'moderate'

2006-08-28T15:02:00.000+08:00

That's how The Washington Times editors look at the recent LSI's survey. Note that they put moderate between quotes. They write:

More than two-thirds of Indonesians favor the country's current secular system of law, according to a privately funded nationwide survey by the Indonesian Survey Circle, a pollster. If that seems like good news, read it this way: This means there are "only" about 82 million Indonesians who favor Shariah... And while Indonesia's religious and cultural climate is justifiably regarded as moderate in comparison to much of the rest of the Muslim world -- and its government is a very useful ally against terrorism -- the numbers still leave plenty of room for concern.

So, even though the survey finds that 70 percent of Indonesians favor Indonesia's current secular system of law Pancasila, according to The Washington Times' editors, "when the aggregate numbers of people are factored in, the study looks considerably more disturbing".

I guess, by similar token, since about 45 millions Americans (15 percent)¹ do not think that "democracy is better than any other form of government", the future of democracy in US is, really, considerably worrisome.

This kind of analysis -- it's just beautiful, isn't it?

By the way, the survey's finding that "more than two-thirds of Indonesians favor the country's current secular system of law" does not mean that "there are 'only' about 82 million Indonesians who favor Shariah". The Washington Times editors are simply wrong.

LSI reports that 69.6 percent of Indonesians favor Pancasila, 11.5 percent favor Islamic country like those in the the Middle East, 3.5 percent favor Western style system of law, and the rest, about 15 percent of them, do not respond or do not have any preference.

The Times's editor should have written that "there are about 28 millions Indonesians (out of 246 millions) who favor Shariah".

Survey Indonesia ¹More accurately, according to the 1999 survey, 12.2 percent of Americans disagree or strongly disagree that "democracy may have problems but it's better than any other form of government". About three percent of them say they "don´t know".

Indonesia's economy grows ten percent?

2006-08-25T10:08:00.000+08:00

I am usually glad to hear an upbeat forecast of Indonesia's economic growth. First of all, I am tired of hearing gloomy prediction by virtually everybody that often turns out to be too pessimistic. Secondly, when the economy has yet to grow at its pre-crisis 6-7 percent growth rate, having a slight dose of optimism does not hurt. Besides, this optimism may turn into self-fulfilling prophecy.

However, when Trade Minister Mari Pangestu says that the economy may grow 10 percent next year, I am dumbstruck.

"We think that the outlook for commodity prices is relatively high," said Indonesian Trade Minister Mari Pangestu on the sidelines of an ASEAN meeting late Wednesday. "A lot of it is being pushed by high oil prices, continued growth in China and India."

"If commodity prices outlook still favorable, we could comfortably reach 10 percent growth next year," she said.

I wonder what she is talking about. Is she saying that since commodity prices is likely to be high next year, then we would increase the production of these commodities enormously -- say, by 50 percent more, or even higher?¹

It sounds like wishful thinking to me. If I have to guess, the probability of having the economy grows by 10 percent next year is zero. Nil.

Update: As Arya points out in his comment, BusinessWeek's journalist perhaps misquotes Mari Pangestu. She may be talk about export growth, not economic growth.

Growth, Macroeconomy Economics, Indonesia ¹I don't know what commodities she is referring to, but I think they are only a small part of Indonesia's GDP.

How much do we know about corruption?

2006-08-24T16:01:00.000+08:00

Benjamin A. Olken, using data from Indonesian villages, offers another installment of working paper on corruption. He finds that even though people know there is corruption when they see one, they may not know much about the details. Corrupt officials are just too smart to cover up their wrongdoings.

Secondly, how people perceive corruption is prone to prejudice. For example, villagers whose community is ethnically diverse think that corruption is more rampant than it actually is.

Here is the abstract.

This paper examines the accuracy of beliefs about corruption, using data from Indonesian villages. Specifically, I compare villagers’ stated beliefs about the likelihood of corruption in a road-building project in their village with a more objective measure of ‘missing expenditures’ in the project, which I construct by comparing the projects’ official expenditure reports with an independent estimate of the prices and quantities of inputs used in construction.

I find that villagers’ beliefs do contain information about corruption in the road project, and that villagers are sophisticated enough to distinguish between corruption in the road project and other types of corruption in the village. The magnitude of their information, however, is small, in part because officials hide corruption where it is hardest for villagers to detect. This may limit the effectiveness of grass-roots monitoring of local officials.

I also find evidence of systematic biases in corruption beliefs, particularly when examining the relationship between corruption and variables correlated with trust. For example, ethnically heterogeneous villages have higher perceived corruption levels but lower actual levels of missing expenditures. The findings illustrate the limitations of relying solely on corruption perceptions, whether in designing anti-corruption policies or in conducting empirical research on corruption.

Corruption, Research Economics, Indonesia

Poincaré conjecture, anyone?

2006-08-23T12:14:00.000+08:00

Three years ago, a Russian mathematician by the name of Grigory Perelman, a k a Grisha, in St. Petersburg, announced that he had solved a famous and intractable mathematical problem, known as the Poincaré conjecture, about the nature of space...

Mathematicians have been waiting for this result for more than 100 years, ever since the French polymath Henri Poincaré posed the problem in 1904. And they acknowledge that it may be another 100 years before its full implications for math and physics are understood. For now, they say, it is just beautiful, like art or a challenging new opera.

A rabbit is a sphere © Xianfeng David Gu & Shing-Tung Yau of NYTimes

It's a beautiful prove in the form of "three book-length papers with about 1,000 pages of dense mathematics and prose between them".

But, what does this have to do with us, Indonesians?

Nothing, I guess. Mathematicians themselves acknowledge that it may take centuries to see the implication of this result to math or science.

What I am wondering about, though, is this: Given the sorry state of Indonesia's research environment, would mathematicians and scientists in Indonesia ever contribute to expanding humans' understanding of science and nature like many of their counterparts in the Western world?

By the way, here are some expositions of the Poincaré conjecture.

Research Indonesia

Inflation rate has always been low

2006-08-22T19:59:00.000+08:00

So, Bank Indonesia cuts interest rate by half point. That's made possible by the continuously falling inflation from the high 18 percent.

And it's the fruit of the Central Bank's tight monetary policy, we are told.

The truth is this: Indonesia's inflation rate has been always low. It looks high only because last October the government cut fuel subsidies, and as a result general prices increased by more than 8 percent.

Indonesia's annual inflation rate¹

If we ignore the one time spike of 8 percent inflation rate in October 2005, an entirely different picture appears: Expected inflation rate may be as low as 6 percent.

Macroeconomy Economics, Indonesia ¹I replace the inflation rate in October 2005 by the average of October inflation rates in the last three previous years.

Yudhoyono, an optimist

2006-08-17T09:11:00.000+08:00

[Susilo Bambang Yudhoyono in a recent state-of-the-nation address to parliament] vowed to do everything possible to improve the country's investment climate, keeping up his fight against corruption and working with parliament to approve draft bills on tax and customs duties.

Yudhoyono said Indonesia's economy would likely expand by 6.3 percent in 2007, up from an estimated 5.8 percent growth rate this year.

That's what I like about him: He is an optimist.

Growth Economics, Indonesia

The most critical problem: Unemployment

2006-08-14T15:10:00.000+08:00

"You know unemployment (is) very high, and then underemployment even higher. It's still a critical problem."

That's Jusuf Wanandi of CSIS quoted by Jerry Norton of Reuters. Norton then summarizes Indonesia's most crucial economic problem succinctly:

Millions in Indonesia, Southeast Asia's biggest economy, live on less than $2 a day, while official data show 11 million people out of work and 30 million working under 35 hours a week.

Those unemployment rates are huge, considering Indonesia's labor force is about 106 million people.

Unemployment Economics, Indonesia

Indonesia's economy picks up in the second quarter?

2006-08-09T04:22:00.000+08:00

Does Indonesia's economy perform better in the second quarter this year?

Leading indicators in 2006 (year on year growth)¹

Some people say so. However, three leading indicators -- car-, motor-, and cement sales -- suggest that the economy may continue slowing down in the second quarter.

Macroeconomy, Guest Economics, Indonesia ¹Source: Gaikindo, AISI, ASI.

Indonesia in pictures: Say, cheese!

2006-08-03T01:47:00.000+08:00

Pictures Indonesia in Pictures

Students of private Madrasahs perform poorly

2006-08-02T12:11:00.000+08:00

Using data from Indonesia, Newhouse and Beegle to evaluate the impact of school type on academic achievement of junior secondary school students (grades 7-9). Students that graduate from public junior secondary schools, controlling for a variety of other characteristics, score 0.15 to 0.3 standard deviations higher on the national exit exam than comparable privately schooled peers. This finding is robust to OLS, fixed-effects, and instrumental variable estimation strategies. Students attending Muslim private schools, including Madrassahs, fare no worse on average than students attending secular private schools. The results provide indirect evidence that higher quality inputs at public junior secondary schools promote higher test scores.

That's from a Newhouse and Beegle's working paper. More complete comparisons of scores among different types of schools are as follows:

Students in public school and non-Muslim religious private schools performed better than students in Muslim schools and secular private schools. However, students attending public Madrassahs performed no worse than those attending public secular schools, and students attending private Madrassahs performed no worse than their counterparts in private secular schools.

In short, in terms of junior secondary school national exit exam scores, students of private-Madrasahs and private-secular schools perform poorly compared to those of public schools and Christian- and Catholic private schools.

Education, Research Economics, Indonesia ¹Do note that "students attending public Madrassahs performed no worse than those attending public secular schools". The authors also conclude that their results "provide indirect evidence that higher quality inputs at public junior secondary schools promote higher test scores".

Indonesia is the largest spice producer

2006-08-01T01:17:00.000+08:00

Indonesia is still the largest producer of cinnamon, cloves, and "nutmeg, mace, cardamons" in the world. (And coconuts too).

Indonesia is also among the largest ten producing countries of many other agricultural commodities like vanilla, cocoa, coffee, ginger, rice, papayas, tea, and soybeans.

Agriculture Economics, Indonesia

Internet may broaden markets for remote villagers

2006-07-31T02:16:00.000+08:00

From Tanjung Karang, it takes at least six hours by car to get to Buay Bahuga, a small village in Way Kanan District, Lampung Province.

For almost half of the journey, we go through a potholed-, narrow- and winding road, up and down the hills of Bukit Barisan Mountains.

As we drive along, we pass through one impoverished hamlet to another.

Most of the villagers here are farmers, cultivating paddy or oil palms. Some others are small merchants.

Considering how isolated these villages are, you would not believe if, at a secondary school here in Buay Bahuga, we could actually browse the great world wide web through broadband access at 700 kilobytes per the second!

That, thanks to QUALCOMM Wireless Reach initiative. An amazing project, don't you think?

Internet access may help opening new economic opportunities for villagers in remote areas like those in Buay Bahuga. So, it would be interesting to see, in three to five years time, what new markets will be created in Buay Bahuga, and which old ones be perfected.

From theGadget!

Telecommunication Economics, Indonesia

SMEs are profitable at any interest rates

2006-07-29T00:04:00.000+08:00

There's no shortage of creditors wanting to lend to pedigreed borrowers, such as PT Astra International, Indonesia's largest car retailer. It's the small and midsized businesses that are getting shut out of the credit market because lenders are unwilling to take the extra risk...

Sandiaga Uno, the chief of the Indonesia Young Entrepreneurs Association, says some of his organization's 25,000 members -- mostly small and midsize firms -- are borrowing from moneylenders at 40 percent annual interest.

That's a huge 30% real interest rate loans, at a conservative expected inflation rate of 10%.

Amazingly, even at such a high real interest rate, these businesses are still profitable. Imagine how small and medium enterprises would flourish if they have access to cheaper funds.

SME, Banking Economics, Indonesia

Go ahead, criticize Indonesia

2006-07-28T09:40:00.000+08:00

Treespotter spurs a heated debate over common sense, which boils down to this: Is it OK if "expat blogs use the words racism, radicalism, Islamism, hypocrites and whatever else rather liberally to express [their] unpleasantness" in living in Indonesia?

Greenstump jumps in. So do Jakartass and Indcoup. (Read the comments at Treespotting). Today, Treespotter offers a sequel. (Yes, they also talk about whether expats' lives in Indonesia are miserable, but let them discuss it among themselves).

Somewhat relatedly, perhaps after having a small discussion at Indcoup, Greenstump also writes that I have "taken [him] to task for being overly negative".

Let me make myself clear: If you guys want to criticize us Indonesians, go ahead. You are more than welcome! In fact, that's what I often do. And so do other Indonesian bloggers.

Of course, it would be nice if you guys DON'T SHOUT AT US WITH LOADED WORDS while criticizing us. (You see that?). But, if being nice is not your style, at least get your facts straight. And secondly, be critical, especially on your own ideas.¹

I cannot overemphasize this enough. You may have lived in Indonesia for years, but you would be amazed by how little you know about this country, its history, and its people.

And trust me, some of your arguments may not even pass Logic 101.

Meanwhile, lighten up. It's Friday after all.

Blogging Indonesia ¹Do note that Treespotter and Indcoup share my concern. "Get your facts straight" and "be critical" are their words too, though the emphasis on one's own ideas is mine.

Government audits reduce corruption

2006-07-27T05:52:00.000+08:00

...Benjamin Olken, an economist from Harvard, used randomized evaluations to study ways to deter corruption in public works projects. He looked at 600 projects in Indonesia in which villagers were responsible for using a grant from the central government to construct a road. In some villages, leaders were told a government audit of work projects would be performed. In other villages, there was more stringent public oversight than usual. Another group of villages served as a control.

While the conventional wisdom, recently advocated by the World Bank, is that public watchdog groups and peer pressure are the best way to combat public corruption, Olken found the opposite: The threat of central-government audits reduced peculation by eight percentage points, while more intensive community monitors barely had an effect. Olken surmises that community monitoring is subject to a "free rider" problem--everyone benefits from the road even without taking up the task of monitoring--as well as an information problem: Community monitors are less skilled than auditors at detecting the theft of funds for building materials.

I blogged this a couple of months ago, but Forbes explains it better.

Corruption Economics, Indonesia

Empty promises?

2006-07-26T13:11:00.000+08:00

Late last year, responding to the economic slowdown, the administration promised that they would stimulate the economy by accelerating the implementation of the 2006 government budget.

The realization of the 2006 Government Budget up to July 7, 2006

So, by now, we would expect that actual government expenditures to be 60% of the budget, or more, right?

It turns out that, as of July 7, 2006, actual government expenditure is less than 40% of the budget. Yes, the administration services its debt (51% of the budget) and pays civil servants' salary (48%). But, so far it has not spent much on capital investment which perhaps what matters most in stimulating the economy and creating jobs.

I wonder what their excuses are.

Macroeconomy, Budget, Guest Economics, Indonesia

Indonesia in pictures: Fish seller

2006-07-25T13:16:00.000+08:00

Pictures Indonesia in Pictures

Forty-two bird-flu deaths, and counting

2006-07-24T10:58:00.000+08:00

Indonesia is about to surpass Vietnam as the country hardest hit by avian flu. And while Vietnam has not had a single human case or poultry outbreak this year, public health officials and experts say the situation in Indonesia is likely to get worse...

Unlike Thailand, which quenched outbreaks by killing millions of chickens, or Vietnam, which used mandatory vaccination, Indonesia has tried a mix of limited culling and vaccinating in rings around the cull — so far, with little success.

...The outbreak is not a big problem in commercial flocks, but "in the country, every household has poultry," he said. "Retired people here keep chickens like other retirees take up woodworking. It’s household food, and income, and something to do. Asking Indonesians to give up their chickens is like asking Americans to give up their dogs and cats."

There were twenty-six human cases of bird-flu last February. Five months later, the figure climbs to forty-two.

Unless the government starts getting serious about this, the worst has yet to come. As I said, more than 6 out of every 10 households in Indonesia raised livestock, and most of these households raise backyard chickens.

Health Public Health, Economics, Indonesia

Guest blogger: Phone Nuryadin

2006-07-24T02:24:00.000+08:00

I thank Budi Putra for guest blogging in the last couple of weeks.

Now, let me introduce our second guest -- Phone Nuryadin of Seputar Ekonomi. He is a researcher at Econit Advisory Group, and occasionally writes op-ed pieces, among others, in Jawa Post.

While blogging here, he will discuss some statistics on Indonesia's macroeconomy.

Guest

BMG: Do explain this, please

2006-07-21T13:55:00.000+08:00

Koran Tempo today reports the following timeline on how the government responded to the recent quake and tsunami:

The quake struck at 15.19 WIB (Jakarta Time), recorded by the Indonesia's Meteorology and Geophysics Agency (BMG) at 5.5 on the Richter scale.
Four minutes later, the Agency's "early warning system" automatically sent 400 text messages about the quake to, among others, government officials and radio stations. There is no tsunami warning, however. Moreover, it turns out that many of the intended receivers did not get the message, including the managers of Radio 68H and the state-owned radio network, RRI.
Soon after, the Agency revised their previous conclusion: the quake was actually 6.8 on the Richter scale.
A quake of this magnitude is prone to tsunami. The Agency did not send new text messages, however.
The news was made public only when a TV journalist asked questions about the quake to the the Head of Agency's Jakarta Branch. The Head said that "At that time I said it is 6,8 on the Richter scale, and tsunami is a possibility".
At 15.36 WIB, Pacific Tsunami Warning Center issued tsunami warning. The quake was even more dangerous: It's 7.2 on the Richter scale.
Tsunami hit Pangandaran at 16.15 WIB, about 39 minutes since the tsunami warning was issued by Pacific Tsunami Warning Center, almost one hour after the quake struck.

Disaster Tsunami, Indonesia

Government fails explaining its failure

2006-07-21T11:16:00.000+08:00

Under fire for failing to warn people in the southern coast of Java about the impending tsunami, this is how the government explains itself:¹

Seven minutes after the quake, we sent hundreds of text messages to "ministers, district heads and mayors as well as some police". The message however told them just the longitude and latitude of the quake. There's no specific tsunami warning at all.

Well said. At least they admit that the text messages were as good as nothing.

The question is this: Why didn't they think of asking radio stations to warn people about the quake?

People know that when an earthquake occurs near the coastline, they have to go to higher ground. "Those who died were at sea or sleeping".

Is that right? On the contrary, AFP reports that many survivors "did not feel the quake at all. Amateur video... showed scores of children and parents unaware of the coming wave".

We don't have the capacity to predict whether the quake would cause a tsunami. We received a tsunami alert from the Pacific Tsunami Warning Center, but that was only about one hour after the quake.

The Indonesia's Meteorology and Geophysics Agency may not have the necessary instruments to predict tsunami. However, the second claim is simply unbelievable. In fact Pacific Tsunami Warning Center issued a tsunami warning 17 minutes after the quake struck.

Look at the timeline in the Tsunami Bulletin issued by Pacific Tsunami Warning Center below, and judge for yourself whether the government could have done a lot more to save hundreds of lives or not:

The quake occurred at 0819 GMT, or 3.19 pm Jakarta Time. It's 7.2 on the Richter scale.
Seventeen minutes later, at 0836 GMT or 3.36 pm Jakarta Time, the Tsunami Bulletin was issued. It warned "authorities for the region near the epicenter should be aware of [tsunami] possibility.
It also estimated that initial tsunami wave would hit Cilacap by 0900 GMT or 4.00 pm Jakarta Time.

Disaster Tsunami, Indonesia ¹I summarize the explanation from the article.

Radio stations could have sent tsunami alarm

2006-07-19T10:53:00.000+08:00

Monday's quake struck at 3:24 p.m. about 150 miles beneath the ocean floor...

After the quake, the Pacific Tsunami Warning Center and Japan's Meteorological Agency issued warnings of a possible tsunami. It struck Java about an hour later.

Science and Technology Minister Kusmayanto Kadiman said Indonesia received the bulletins 45 minutes before the tsunami hit but did not announce them because they did not want to cause unnecessary alarm.

"If it (the tsunami) did not occur, what would have happened?" he told reporters in Jakarta, noting that there was no effective way to spread a warning without a system of sirens or alarms in place.

Kusmayanto Kadiman worried what would happened if tsunami did not strike. Shouldn't he be more worried if tsunami hit, and he didn't do anything?

Moreover, not having proper alarm system is not an excuse at all.

Didn't he know that word of mouth travels fast? He just needed to call a few radio stations in the southern coasts of Java, and hundreds of lives would have been saved.

Update: Antara reports that Kusmayanto Kadiman "denies he knew tsunami would occur". See, however, my latest post on this.

Disaster Tsunami, Indonesia

Creeping Christianization?

2006-07-17T13:57:00.000+08:00

Do Christians vigorously proselytize Indonesians Muslims?

Many people believe so. And some of them, it seems, take this very seriously.

It is also a reader's claim in a letter to Jakarta Post's editor a while ago. Quoting statistics from Leo Suryadinata, Evi Nurvidya Arifin and Aris Ananta's Indonesia's Population, the writer proves his/her case:

...the number of Christians has risen from 8.74 million in 1971 to 17.95 million in 2000, or an average growth rate of 2.48 percent annually compared to the annual growth rate of 1.86 percent of the Muslim population.

I have not looked at the data in the book closely, but I guess the writer misinterprets the statistics.

The composition of religious adherents in Indonesia¹

Here is a quick look at changes in the composition of religious adherents from 1971 to 2000:

The share of Christians in the population increases by 1.5 percentage point.
The share of Muslims increases too, by 0.7 percentage point.
The share of Buddhist and Hindu each falls by 0.1 percentage point.
During the 2000 census, the government did not recognize Confucianism -- its share "falls" by 0.8 percentage point.
The share of "others" falls by 1.2 percentage point.

So, what do you think?

Via Greenstump.

Religion, Population, Statistics, Numbers Economics, Indonesia ¹Source: Table 4.1.1 of Leo Suryadinata, Evi Nurvidya Arifin and Aris Ananta's Indonesia's Population, calculated from Biro Pusat Statistik's population censuses.

Semi-hiatus

2006-07-16T15:04:00.000+08:00

I usually blog once a day, Monday to Friday. However, starting this week, I will be on semi-hiatus -- I will be blogging less frequently, perhaps once or twice a week.

Regular blogging will resume late August or early September.

Of course, our guest bloggers will continue blogging here as scheduled.

Blogging

Goat as saving account

2006-07-14T08:49:00.000+08:00

Karsiman bought a goat at Rp 300.000 (about US$33) -- his two year savings from farming cassava, corn, and coconuts. Raised for one year and had it impregnated, now the goat has two six-month-old kids.

"They are my saving for the rainy days", the 45 years old and a father to three children said.

Raising goats is profitable. A goat has babies once a year, usually two or three at a time.

Agriculture Economics, Indonesia

Bailing out Garuda, again

2006-07-12T11:04:00.000+08:00

Subject to four conditions, the government will bail out Garuda Indonesia, the state-owned airliner. According to Indonesia Digest, the conditionalities are:

Cut down operational costs by 10%.
Fire 900 of its staff.
Sell unprofitable subsidiaries.
Form strategic alliance with other airliners.

It means, the government bails out Garuda first, and later it will see whether Garuda would satisfy these "conditionalities" or not. If it turns out that Garuda fails, the government will punish Garuda by, um, bailing it out again.

I have my reasons for being skeptical. This would not be the first time the government bails out Garuda. And I guess, in the previous bail out, the government also imposed similar conditionalities.

SOE Economics, Indonesia

Komodos win, people of Komodo loose

2006-07-11T09:55:00.000+08:00

Mohammed Sidik used to sell goats to Komodo National Park to feed to the wild Komodo dragons, the world's largest lizards, in a gory display for tourists.

Park officials banned the practice a decade ago because they worried that the dragons were becoming lazy. Now the 10-foot-long predators waddle three miles to this squalid coastal village, raid Sidik's herd and eat his goats for free.

"For the last two years they have been coming to the village," said Sidik, 60, who has lost seven animals to the dragons. "When they get thirsty, they come down to our well. The park no longer feeds goats to the dragons, so now the dragons come here."

The dragons' visits highlight how things have gone in Komodo National Park since its founding in 1980: great for dragons, not so great for people — or goats.

From Chron.com.

Environment, Tourism Economics, Indonesia

Indonesia is going nuclear?

2006-07-10T11:00:00.000+08:00

Jakartass says "No". Indcoup concurs. Greenstump calls this plan "sheer utter insanity". Recently, Greenstump is at it again.

Ahmad Qisa'i, on the other hand, is more lenient. He concludes with a quote from an editorial of the New York Times: "...there is no doubt that nuclear power could serve as a useful bridge to even greener sources of energy".

What do you think? Should Indonesia build nuclear power plants?

Reading all these, my first reaction was: Why not. After all, the developed worlds are doing it.

And everybody else is considering one.

On second thought, I agree with Jakartass and Indcoup that we should rely more on solar power -- if we could afford it.

That's a big "if", of course. Even the Swedes, who are ten times richer than Indonesians, think nuclear power is the better offer.

On further thought, I think we should acknowledge that nuclear technology now is a lot safer then it was a couple of decades ago. And that Indonesia's economy is hungry for electricity. And that improving infrastructure is one of the surest ways to get rid off poverty.

And that, a few years down the road engineers hopefully invent a much safer and cleaner nuclear power plant, just in time when Indonesia would build one.

Infrastructure, Energy, Nuclear Economics, Indonesia ¹The size of each country indicates the proportion of worldwide nuclear electricity produced there.

Missing unemployment target by a mile

2006-07-07T16:13:00.000+08:00

Phone Nuryadin of Seputar Ekonomi has a grim picture of Indonesia's unemployement rate: Susilo Bambang Yudhoyono, in his presidential campaign, promised to cut unemployment rate from 9.9% to 5.1% by 2009. Actually, in the last two years unemployment rate has been increasing.

So, I think it is safe to assume that, by the end of his term, Yudhoyono will miss his unemployment rate target by a mile.

And, by the way, the same applies to Yudhoyono's poverty rate target too.

Unemployment, Poverty Economics, Indonesia

No Content, No 3G

2006-07-06T14:37:00.000+08:00

Indonesia, which has five 3G operators already, will be the third ASEAN country after Singapore and Malaysia to have WCDMA-based 3G services. We will be joining around fifty million people who already have access to this service around the world.

But it's not clear what services the operators will offer. When the operators did 3G trials last years, they indicated that their services would be video conferences, video telephony and internet broadband connection only.

According to an Ericsson Consumer Lab survey in Indonesia, video telephony -- being able to see the person you are talking with -- ranked only fifth in the list of services that users were interested in. Topping the list was radio entertainment, followed by music downloads and mobile television.

Clearly, if high-speed data access or video telephony is not the reason you want to move up to 3G, then it must be the content.

Interestingly, so far we haven't heard about official announcements or business agreement on contents development. Moreover, Indonesia has a few content providers only. Have the 3G operators approached them to provide killer content for 3G?

Or rather, I think it's funny. If there is no content, there is no 3G, right?

Guest, Telecommunication Economics, Indonesia

Room for a rate cut is there

2006-07-05T09:09:00.000+08:00

Analysts used to frown upon Bank Indonesia's plan to cut interest rate. Now, it seems, many of them are singing a different tune.

"Domestic demand and personal spending is very weak, they have got to undo their tightening," said Lim Su Sian, a Singapore-based economist at DBS Group Holdings Ltd...

"The Fed action didn't create panic in the market and the rupiah strengthened, that removed concern that the currency will weaken if Bank Indonesia resumes cutting its benchmark rate", said Purbaya Yudhi Sadewa, chief economist at PT Danareksa Sekuritas in Jakarta. The central bank needs to cut the rate to below 10 percent before an "impact on the economy will be significantly seen," he said.

"The room for a rate cut is there," said Song Seng Wun, an economist at CIMB-GK Research in Singapore. "The question is the magnitude, whether it will be incremental or a much bigger than the 25 basis points." A basis point is 0.01 percentage point...

"The political pressure on BI to cut the rate is big," said Anton Gunawan, chief economist for Indonesia at Citigroup Inc., who maintains his forecast for no change in the BI rate this month. "Political pressure may win the battle."

Macroeconomy Economics, Indonesia