Monetary and Fiscal Policies in Indonesia

Heyho peeps, i’m in the mood for something brainiac, and that brainiac thingy that crossed my mind was my master study. So, here it is, my mini paper in General Business Environment in fiscal monetary section ๐Ÿ™‚

FISCAL AND MONETARY POLICIES IN INDONESIA

KKD

The volatile price of a product in a market is becoming usual in our daily life. The price volatileness was caused by human intervention. The intervention was purposed to develop the economy to be better. The development of economy can be beneficial for the society.

In the volatile and uncertain economic condition, people tend to seek the best business that will be able to survive during that condition. In 1998, Indonesia experienced an economic crisis which caused the rise of inflation rate. Everything became expensive and non affordable for the society. Thus, the government tried to stimulate the economic growth by enacting friendly policies that would bring back the investment. Those steps taken by the government were responded enthusiastically by the business player in Indonesia. The government had intention to do such intervention in order to make the economy became dynamic again. Actually, the economic downturn was like a double-eyed knife, it could decline the company performance or it can boost the performance for the party that can see the opportunity in this condition, such as the insurance company which will be easier to sell its product.

indonesia-inflation-chart

In a micro level, it is desirable for a country to have a smooth growth inside. The smooth growth will be preferred by the investors regarded the low risk that will they bear. As we know China is a country with highest economic growth. In July 2011, the second quarter of China growth reached 9.5 percent[i]. ย The economic growth forced the Chinese government to conduct tight monetary policy to control inflation. This smoothing phenomenon also occurred in the company. A volatile growth which combined the great leap and great decline would definitely scare out the investor and stakeholders. The more stable the growth, the less worried the investor will be.

To control the economy, the government usually conducts the fiscal policy. One of the fiscal policies is the state budget (APBN). The arrangement of APBN was based on several factors, such as: the government project (the investor thus can see the business opportunity by seeing what kind of projects run by the government), the tax rate (especially the corporation tax), and the prediction of gasoline price. Below is the goal of conducting fiscal policy:

  • To maintain the macro-economy stability or inflation
  • To allocate government fund
  • To distribute the income

The realization of fiscal policy in Indonesia was never be the same and certain through the years. In the Old Order era, Soekarno was known with his fiscal policy related with denomination and huge amount of money print. Due to that policy, there was excessive money distributed through the society which rose the inflation into 600 percent. In the New Order era under Soeharto, Indonesia applied the balance budget method which succeed in awakening Indonesian economy. At that time, Indonesian economic performance was great and in its golden age. Unfortunately, the large amount of foreign debt proportion ruined the economic stability and even forced Soeharto to step down from his position as President in 1998.

Recently, the focus of fiscal policy is related with the gasoline price estimation and the tax rate. Tax itself is the most important income source for a country. The source of tax is different from one to other countries, for a small or newly independent country the tax income is coming from the foreign trade tax, the developing country generated tax income from the internal business inside the country, meanwhile the developed country already seek the tax income from the individual in the country.

Since corporate tax is very crucial factor in running the business, there were a lot of tax dispute related to this issue. The west-European countries like England and Germany are experiencing 40% to 60% tax in their countries. Although the economic stability in such countries like England is good, but the tremendous tax rate will make the investor and the business player there to reconsider their decision in having a business in high tax countries. In answering that matter, small and new born countries in Eastern Europe like Estonia posses zero tax rate policies. The policy was made by Estonian government to attract many investors to enter Estonia. As a new-born country which has limited resources, it is very essential for Estonia to get a lot of fund to build more infrastructures and building a stable business climate. Zero tax rate policies then stimulate other European countries to change their tax policies. The progressive rate methods then modified into flat tax rate policies. Many countries including Indonesia were also influenced by the tax-rate change wave. The tax rate competition among countries is very tight, the five percent difference only will able to bring a big impact towards the business inside the country.

Fiscal policy has many influences towards a nation economic stability. Fiscal policy in Indonesia was created based on the law (Undang-undang โ€“ UU) which has one year valid time. The policy then will be used as the guideline in Indonesian business for a year, except there is any change related to the policy. Due to the rigidness, the business players only need to pay deep attention at the announcement of fiscal policy. Meanwhile, the monetary policy in Indonesia was reflected in the SBI rate. Thus, the business players and economic analysts have no other choice but pay attention in this rate due to the independent nature possesed by Indonesian Central Bank (BI). The rise of SBI rate will trigger the rise of credit rate as well. The volatileness of monetary policy force the government to use assumption, such as the global gasoline price, SBI and credit rate, for the decision making.

Monetary policy usually used for maintain the internal and external stability which related with the domestic currency and trade balance. The focus of domestic currency stability is low inflation rate and stable exchange rate. Monetary policy has two branches: demand management and monetary targetry. The chain process from this policy was started from this following: monetary policy -> monetary system -> interest rate -> economic activity.

In 2008, Indonesian Central Bank was lowering the interest rate in order to anticipate when the condition turned into worst. Fortunately, Indonesia did not get much impact from the global economic crisis in that year. From the explanation and example above, we can simply presume that a government should pay attention profoundly related with the economic condition in Indonesia. When there is a bad sign, the government then will be able to intervene in the right time.

Source:

Sri Adiningsih powerpoint slides. (2011). Fiscal and Monetary Policies.

[i] Metro TV News. (2011). Pertumbuhan Ekonomi China 9.6 Persen. Retrieved July 20, 2011, from http://metrotvnews.com/read/newsvideo/2011/07/14/132054/Pertumbuhan-Ekonomi-China-9-6-Persen

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Master Study, The Story 3 – Photo Session

colorful 3

My dearest readers, what are you doing right now? Have you prepared something special for new year eve? Tick tock, the clock is ticking, the year is changing pretty fast. 2012 was such an amazing year. ย I have tons of lifechanging experiences, which successfully transformed me into a better person ๐Ÿ™‚

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MM UGM Batch 56 International Class plus Exchange Students from France and Netherlands

When i opened my laptop, i was thinking about my MBA friends in international class batch 56. Although our togetherness was kinda short, but the memories with them are always on my mind. Time flies. Some of them (including me) have already managed to find a good job, some of them are still struggled with their thesis, and some of them are now studying overseas to achieve their double degree. I miss you guys. Wherever you guys are now, my pray goes with you always. I wish 2013 will be anย enchanted year for us.

colorful 5

Ahmad (the man in the middle) forgot to wear our red “uniform”

Here I present some pictures when we hadn’t separated by continent and thesis ๐Ÿ™‚ Too bad Alberto couldn’t join this photo session. ย Take care guys, and thanks for the joy and the wonderful memories.

colorful 2

Lille, une belle ville

PS: This draft was made one year ago

Dear readers, how are you? I am in France now. I can’t tell you precisely how exited i am here. I’ve been dreaming to come here since i was in senior high school. The wait was seemed like forever, but it’s worth the wait. Ok, let me share you about what i’m gonna do here in France.

Three months ago, I assigned for student exchange program in my hometown university, actually there were several choices about the exchange destination, such as Austria, Germany, Netherlands, Scotland. Japan, Singapore and Malaysia. I did not have hard time to choose which university cuz as i told you previously that France already haunted me for years ๐Ÿ˜€

enfiiin….

After being occupied with all the administrative requirements and visa matter, i finally left Indonesia at September 4, 2011. Hmmm, it was stated that the flight would be about 15 hours, including two hours transit in Changi airport, Singapore, but unfortunately, there were some problems with the aircraft which made me stay longer in Changi. I made my touchdown in Charles de Gaulle airport at 11am and after i took a TGV to Lille.

Here, i don’t live in Paris, but in Lille, located in the northern part of France. I remembered the first day i arrived here. I was so shocked with the weather. Oh please don’t simply blame me. Will you expect the sunshine, rain and wind in a day? Yeaah, that was happened to me, hahahha. Well now i already learn that no matter how sunny outside, you never go wrong by prepare a scarf or umbrella in your bag before leaving your apartment.

Nathalia, Alejandra and me ^^

Talking about apartment, i share a flat with two girls. They were from Colombia and Finland. They were so nice and sweet. I do love them and my flat. Until now, i just can not believe my luck in getting this flat. It’s located in the center of the city, i only need to walk (Gosh, please remind me that i have to tell you about the walking culture in Europe) for 10 minutes to get to my university, and the best part is that i got a very good price. You have to see the looks of my friends when they know about my flat ๐Ÿ™‚

The rooms and the kitchen

Well, there are still a lot of things that i wanna share, literally. No worries, i’ll be back in a jiffy ๐Ÿ˜€ Have a good day for you all…

Lots of love..

Dewy

Master Study, The Story 2 – The End of Trimester 1

Yaaaay, by reading my title i believe you’ve noticed that i’m done with all my exams. Yaaaay. Finally those exhausting exams and paper are over. As i mentioned previously in my last post, i take the international program which requires me to conduct everything in english. Even when i write paper. Sigh. But you know, it’s so true that the first time always be the hardest. I still remember how confuse i was in writing my Operational Management final paper, which contained 20 pages least. Hahahahaha. But well, hell yeah, it’s already passed, i just get down on my knees and starting to pray for the good score.

I had a week holiday, but hmmm, i simply can not say that it was pure holiday. There were lot of things to do. I had postponed them during my hectic schedule. Eeeew. Several stuff already lining down on my mind, such as:

  • Go to immigration office to apply the passport
  • Complete all the visa documents needed
  • Run the hybrid seminar conducted by my university
  • Back to my routines as a part-timer teacher (i took a week off due to my exams, lol)

Since my first trimester was officially end, it means that i have to say goodbye to 8 international students from Europe that already became part of our friends for the previous four months. It was funny seeing their effort to attend the morning class at 7am. Some of them were fell asleep of course, but i was touching enough by seeing them not skip the class. Hehehehehe..

My favorite subject for this trimester was Business Ethics. It was such an insight for me that we have to conduct our business ethically. Well, it might be costly in the beginning but it can create a long term profit for our business *_____* ups, sorry, i better stop now before you choose to quit reading my post ๐Ÿ˜€

I would like to thank my friends, yeaaaaay, we did it. The first trimester finally over. Happy holiday guys, i’ll see you again in the next two weeks. And happy Good Friday!!

Just a piece of my stories

Hey all, what’s you’ve been up to?

I’ve been extremely busy recently, but these two years so far are excellent for me. I got many priceless gifts that i never thought before. So, in order to payback my hibernate time, i’ll explain you in details. It can’t be any better, can it? Lol…

It was start with my graduate program. I felt confuse in choosing within the international class or the bilingual class. Mostly my friends chose the bilingual class. Well, actually the difference among those two classes remain only in the way the lesson deliver and the students. In the int’l class, everything is in english, like the books, the presentation, and even the thesis. Nah, the last reason was my biggest consideration in choosing int’l class. But in int’l class you can have int’l friends will allow you to experience the int’l ambiance in the class. And guess, finally i decided to choose the int’l class. My decision was made in the last minute, literally. But so far i do enjoy my choice. My lecturers and my friends are wonderful. I have new friends from Europe, mostly from Netherland and France. I will attach their pics later, no worries ๐Ÿ˜€

In February 2011, Marlyne, a good friend of mine visited me from Singapore. I was so happy to see her again. We’ve been friends since senior high school, but now she works in Singapore, so it’s kinda difficult to meet her. No wonder when the oppurtunity finally came, it felt like a reunion, because i didn’t meet only with Marlyne, but also with Santi and Puspita. We went to Sangam House, a unique Indian restaurant, and discussed many things. We did have a good time there.

Santi, Puspita and Me

Marlyne

Several weeks after, i remembered that i had a voucher given by Marlyne. It was a voucher to shop in Body & Soul. Well, two days before the due date, i went to Body & Soul store and started hunting. Time went by, but still i couldn’t find any good outfit *sigh… I was thinking to come back later when finally i saw it, an elegant black dress. I was so thrilled and even couldn’t believe it with my very own eyes. So i grabbed it to the fitting room and voila, i bet you know the feel when you see your reflection in the mirror wearing a perfect dress ๐Ÿ™‚ I took several pictures in the fitting room, so you perhaps can see the price tag was still there, hehehehehe… Anyway, i also bought hotpants, but i didn’t take the picture, i guess the dress pictures already enough ๐Ÿ˜€

Black is my color

Last but not least, in September 2011 i did an exchange program to France. Enfin!! I was there for 5 months. I chose to do the exchange to SKEMA Business School in Lille. Not only because of the well reputation of SKEMA itself, but also due to my french friends suggestion. Lol. It was a very priceless experience. I’ve been dreaming to go to France since i was in the undergraduate. I didn’t know why, but France always has some kind of magical spell to me.

je suis allรฉe la deja, au France. Yaaaaay

Hmmmm, i feel really grateful with all these gifts. Sometimes, good thing will come to you with its special way. I’ve witnessed it myself. So, i’ll see you again later, although i don’t know when, since i have tons of works to do. Wish me luck then, and happy weekend all

Master Study, The Story 1 – Matriculation

Hi thereeee, how are you? I just finished struggling for finishing my master thesis. Have i told you that i take the Master now? I don’t know, but i just wanna study something new. Well, my undergraduate background was Politics. I took International Relation, but now i take Management as my Graduate major. At first, i only had a little faith for my choice, and the faith was getting tinnier when i met my classmates. They’re totally brainy. Fortunately my lack of confidence happened only in the first week. I kept saying to myself that if i didn’t make any move i would be left behind.

Seven subjects, three months and one brain only

How about simpler formula??

I had to join the Matriculation first. Matriculation means you’re registered as an official student. It’s the process of beginning study at a university, and fulfilling any prerequisites. Sooooo, night after night i forced myself to read all those thick economics book in order to make me at least familiar with economics vocabs. FYI, i had no economics background which just make things harder. And i had to learn how to use the calculator. It was quite funny for me because i just notice several very useful function of calculator. I didn’t even imagine it before. Geeeez… Well, briefly, during the first month of my matriculation i found that i couldn’t get enough sleep everyday. All i wanted just crawl into the bed and sleep like a baby.

Finally the matriculation is over. And i was surprised that my result wasn’t bad as i predicted before. Yeah, now i believe that we have to try our best first, no matter what the result will be. And here i am, gladly to inform you that now i’m officially a graduate student. LOL. Well, my long journey is still waiting. And i’ve put some pictures about all my dearest mates in this battle field. They’re so adorable and helpful. Enjoy and have a nice holiday ๐Ÿ™‚

MBA students batch 56, Yaaaay….

We might came from different background, but hey, we get along very well. Luv you all