Abstract

 

The world is currently in crisis, a financial crisis of 2008 up to 2012. The phenomena of financial crisis is not new, as the world experienced it on 1930’s Great Depression, not to mention in the late 1980s and the famous 1996-2000 Asian financial crisis that held Indonesia and most countries in Asia in monetary crisis. Is there a way for countries to turn this? International Monetary Fund (IMF) came as a solution to cure those countries in need of fund that includes Indonesia. Indonesia is not cured. However, in 2012 Indonesia declared their pledge to IMF of 1 Billion dollar in terms of bonds and even the Indonesian president by UN Secretary-General is appointed as High-level Panel advisor of Millennium Development Goals beyond 2015. What is the relevancy of Indonesia pledge to IMF of 1 Billion dollar in the midst of world financial crisis? This paper looks at the world financial crisis from Indonesian perspective.

 

About the Author

Francis M. Hutabarat,PhD is Associate Professor in Business Management at the Adventist University of Indonesia (UNAI). He finished his Master of Business Administration (MBA) emphasizing in Business Management from the Adventist International Institute of Advanced Studies (AIIAS) in 2007 and he completed his PhD in Business Management from the Philippine Christian University (PCU) in 2010.

Chapter 1 - Introduction

Indonesia is a developing country in the South-East Asia Region that had its ups-and-downs in terms of economy. The country has suffered economic crisis in 1997 that impacted the Asia region and other countries around the world, and on 2008 the world has suffered another crisis that impacted many countries. In order to resolve the impact of the crisis on 1997, International Monetary Fund (IMF) was asks by the government to help them to cure the Indonesia economy and so the IMF was helping Indonesia with loan funds. However, the help given doesn’t cure Indonesia even years afterwards. Years later, another economic crisis turned the world around.

 

The financial crisis in mid-2007 on the subprime mortgage lending in the United States has sobering chain-effect all over the world. In early October 2008, the crisis spread and lead to a wider financial crisis include capital markets and banking. Although, the U.S. government has provided bailout funds amounting to 700 billion dollar, the bailout is apparently not considered sufficient by the business world, so the prices of shares on the New Stock Exchange continued to fall. On October 6, the Dow Jones stock index fell to under 10,000 and a domino effect to the entire world. Stock price index in the financial world follows the same rhythm that occurs in the U.S.  Many countries in Europe face financial difficulties and further financial distress, Spain, Italy, German, and more strikingly Greece that can be considered bankrupt since they are low in debt because of the crisis.

 

These circumstances let people to be discouraged at the time and question if there’s any country is saved from these economy catastrophe. Suddenly the world stops to a glance of a promising new hope, which is Indonesia. By chance, the world witnessed something absolutely shocking. A new-turn appears in the economy of Indonesia. Indonesia immediately showed great potential after becoming known in the international community. First by ending the CGGI in 2007, and then the IMF loan and further that Indonesia was considered saved from the 2008 economic crisis. But the road to established economy is a harsh path. The crisis does not stop but considered continued in 2010 and Indonesia style of open-market would lead to other countries emerge dominating in the import products and thus Indonesia taking remarkable beatings. Not to mention grievous  corruption crimes committed by officials and bribery attempt continuously given to government officials. However, against all odds, Indonesia would rise up and pull-off miraculous comeback in the economy and in 2011 Indonesia declared their pledge to IMF of 1 Billion dollar in terms of bonds and even the Indonesian president by UN Secretary-General is appointed as High-level Panel advisor of Millennium Development Goals beyond 2015. A question then arises on what is the relevancy of Indonesia pledge to IMF of 1 Billion dollar in the midst of world financial crisis?

 

The question is a valid one as people wonder about leadership suggested in managing and leading in the times of chaos and crisis. The country of Indonesia is in the midst of world financial crisis. Indonesia was not cured in the previous crisis handled by the IMF. However, in the year 2011 there is a pledge given to IMF by Indonesia of $1M. More questions arise as how does Indonesia turn from zero to hero? Can there be hope for countries in crisis to overturn their misfortune? Looking on how Indonesia manages its struggle in the midst of world crisis the following question arise too answer it, they are:

 

1. What is the economic fundamental of Indonesia in terms of Inflation, Unemployment, and Economic Growth?
2. What are the effects of economic crisis pre-2008 and post 2008 on companies listed on the Indonesian Stock Exchange based on financial statement analysis?
3. What are the relevancy of Indonesia pledge to IMF of 1 Billion dollar in the midst of world financial crisis?

 

The more questions arise indicate that the wonder is on Indonesian Leadership, the kind of leadership that can bring the nation to go through hardship and world crisis. It is not an easy feat nonetheless Indonesia shows the world how to cope with it and further giving a pledge to International Monetary Fund in the amount of 1 Billion dollar.

 

The book will further explore the crisis that the world faced and how it impacted the Indonesian companies. Several companies were selected from selected sectors listed in the Indonesian Stock Exchange to see the effect of world financial crisis towards Indonesia companies. Thus, Indonesia leadership and strong resources is introduced in the literature to look at how does it relevant to the pledge given to International Monetary Fund (IMF).

            

Chapter 2 - Indonesia and Crisis

Financial Crisis

 

The Asian crisis at the end of the 1990s saw Indonesia’s economy and currency collapse as well as the weakness of the banking system exposed (Tambunan, 2011:83). For the sake of recovery and through close cooperation with the IMF, Indonesia set about reducing its debt burden which stood at 83% of GDP in 2001 down to 26% in 2010 (Ministry of Finance). In comparison with developed and other emerging markets this is a very modest figure and is targeted to reduce further to 25% in 2012 which places the country well below the OECD maximum debt ratio of 30%. Indeed, if anything this figure is actually too low considering the vast sums required for infrastructure development which is a rare position for economies to find themselves in today’s global environment. The budget deficit also offers grounds for optimism standing at 0.6% of GDP at the end of 2010, even lower than the forecasted 2.1%. Spending of up to 1.8% is expected over 2011, having been approved by parliament to cover subsidies in light of higher oil and food prices. The government sales of suckh bonds over the course of 2011 to potentially cover the deficit have also proved very popular among local and international buyers. This combined with the imminent move up to investment grade status by rating agencies and the

Impressum

Verlag: BookRix GmbH & Co. KG

Tag der Veröffentlichung: 31.07.2014
ISBN: 978-3-7368-2886-5

Alle Rechte vorbehalten

Widmung:
To My Father Dr. Reymand Hutabarat and my mother, Mrs. Rawilyne Hutabarat, MALS