...Currency War Issue Currency war becomes hot topic in several mass media lately. G-7 group even reminded, war could disrupt the currency of world economic growth. This war was carried out by countries that want to increase exports. Countries deliberately weakening its currency exchange rate so they could increase their exports. The world financial leaders including the World Bank and International Monetary Fund (IMF), has also discussed this issue at a meeting in Washington in early October 2010. On the occasion, the IMF warned the governments in some countries not to use exchange rates as a tool to encourage increased exports, because it can cause a currency war between the countries in the world. Some countries being criticized for its policies to keep their currencies remain weak. Japan, for example, they intervene for the first time since 2004, to sell 2.12 trillion yen on September 15. This is to protect the increase in the yen exchange rate that has reached its highest level in 15 years. The debate actually starts from the currency war between China and the United States. US have been protesting China over the years. US judge China to hold its currency not to strengthen to protect its exports. US even plans to establish sanctions against China for not allowing its currency to strengthen against the U.S. dollar as it should. China's rapid economic growth has caused China's trade surplus against its trading partner countries to increase. In the second quarter of 2010...
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...Indonesian Domestic & Foreign Debt Since the Old Order (Orde lama), Indonesia has used foreign borrowing to finance development. Indonesia utilized foreign debt during the first period of 1966 . In the early 1960’s as a new independent country, government needs fund to finance country’s development. While only limited domestic fund source available with undeveloped domestic capital market, to fill domestic saving–investment gap external fund was the only available source. It is defined the primary goal of external fund was to accelerate urgently needed economic growth, where the external debt would turn into government’s spending which in turn would generate investment and to accelerate the growth. As economy developed, it was expected that the government could earn sufficient foreign exchange to service foreign obligations, to accelerate the development process, and gradually to lessen the country’s dependence on external resources. And still in the 1990’s, external public debt actually was not solely addressed to fill the financing gap of the government but rather to fill up budget deficit in order to foster the economic growth rapidly. The huge growing number of external debt used however has not always significantly contributed to the growth expected. It’s true that the economic growth used to reach the level of 7% in the middle of 1990’s. But on the other hand, the debt service also increased significantly. The debt burden indicators...
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...MIXED ECONOMIC SYSTEM: INDONESIA Indonesian Economy Overview The largest economy in Southeast Asia, Indonesia – a diverse archipelago nation of more than 300 ethnic groups -- has charted impressive economic growth since overcoming the Asian financial crisis of the late 1990s. The country’s gross national income per capita has steadily risen, from $560 in the year 2000 to $3,630 in 2014. Today, Indonesia is the world’s fourth most populous nation, the world’s 10th largest economy in terms of purchasing power parity, and a member of the G-20. It has made enormous gains in poverty reduction, cutting the poverty rate to more than half since 1999, to 11.2% in 2015. Indonesia’s economic planning follows a 20-year development plan, spanning from 2005 to 2025. It is segmented into 5-year medium-term plans, called the RPJMN, each with different development priorities. The current medium-term development plan – the third phase of the long-term plan -- runs from 2015 to 2020, focusing, among others, on infrastructure development and improving social assistance programs in education and healthcare. Such shifts in public spending has been enabled by a reform of long-standing energy subsidies, allowing for more investments in programs that directly impact the poor and near-poor, as well as vast improvements in infrastructure investment. Considerable challenges remain in achieving Indonesia’s goals. Due to weaker demand for commodities – the fuel for Indonesia’s economic boom in the...
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...the affect on their own economies and offer aid to the financially troubled nations (Sanger 1). The East Asian crisis has affected almost all of the Asian nations, but the three hardest hit countries are Thailand, Indonesia, and South Korea. The panic began in Thailand in May of 1997 when speculators, worried about Thailand's slowing economy, exces sive debt, and political instability devalued the baht as they fled for market-driven currencies like the American dollar. Indonesia's economy soon fell soon after when the rupiah hit a record low against the U.S. dollar. Indonesia is plagued by more than $70 billion worth of bad debts and a corrupt and inefficient government. Thailand and Indonesia also suffer from being overbuilt during real estate booms that Reven2 were the result of huge influxes of cash by optimistic foreign investors. South Korea faltered under the weight of its huge foreign debt, decreasing exports, and weakening currency (Lochhead 4-5). Other major countries touched by the crisis are Japan, China, Malaysia, and the Philippines. Japan's economy is burdened by $300 billion in bad bank loans and a recession. Chinese banks may carry bad banks loans of up to $1 trillion. The banks lend 66% of China's investment capital to state-run industries that only produce...
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...Archilles (Multistrada Arah Sarana, Tbk) A. company profile PT Multistrada Arah Sarana Tbk (MASA) was established on June 20th, 1988 under the name of PT Oroban Perkasa. It is engaged in manufacturing Passenger Car Radial (PCR) tires and Motor Cycle (MC) tires for export and domestic market. MASA has markets its product with brand name of “Corsa”, “Strada” and “Achilles”. What happend to MASA.. * Global Crisis not to Affect MASA’s Sales (2009) In 9M09, MASA successfully raised its sales 19.2% YoY to Rp 1.2 tn. Its car tire production volume increased from 3.24 mn units in 9M08 to 3.51 mn units in 9M09, growing 8.29% YoY. In addition, MASA’s production volume of motorcycle tires boosted from 0.61 mn unit to 1.03 mn units in the same period, reflecting a 67.87%. As comparison, MASA suffered foreign exchange loss of Rp 118.5 bn in 2008, cutting its net profit margin to 0.22% as an effect of global financial crisis. * Continuing Expansion due to High Demand (2009) MASA continues to increase its car tire production capacity from 12,827 to 15,000 units per day during 2008-2009. In the same period, MASA also extended its motorcycle tire production capacity 205% YoY from 2,394 to 7,300 units per day. * Superb Performance Amid The Slower Growth of Domestic Tires Industry (2011) Amid the slower growth of Indonesia tires industry in 2011, MASA booked a significant revenue growth. In 2011, MASA’s revenue grew by 42.6% YoY to Rp 2.9 trillion from Rp 2.0 trillion in previous...
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...Executive Summary This paper analyses the factors which led to the economic crisis which faced Indonesia in 1997, which in turn led to Indonesia making major reforms in government as well as in every other sector. It also looks at the major factors that also have to be improved even though major reforms have swept the nation. The policy of decentralisation, although done for the better, has its drawbacks which can hurt Indonesia in the long run. Contents - Executive Summary 2 -Acknowledgements 3 -Introduction To The Topic 3 -Background Literature Survey 4 -Observations 8 -Conclusions and Recommendations For Future Studies 9 -Appendix/Bibliography/References 10 Acknowledgements I would like to thank Prof. Perrie, for initiating this project and letting us choose suitable topics to analyse. Introduction to topic Indonesia is a country with around 240 million people. From being one of the worst hit countries of the Asian financial crisis of 1997-1998 it has become one of the largest countries in the South East Asia in terms of Economy. With a population so big and also a diverse ethnic culture to keep in mind the reforms which were propagated after the financial crisis has been largely the decentralisation of the Government...
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...THE IDEAs WORKING PAPER SERIES Paper no. 01/2012 Fiscal Policy Evolution and Distributional Implications: The Indonesian experience Smitha Francis Abstract This paper analyses Indonesia’s resource mobilisation and public expenditure policies against the backdrop of her inequality trends and macroeconomic policy evolution. It is argued that the country’s fiscal policy stance has been adversely impacted by her monetary and financial sector policies under an open capital account, with attendant regressive distributional implications. Juxtaposing the analysis of revenue mobilisation trends and taxation policies with the evidence of increasing asset and land concentration and persisting high inequalities reveals that the increase in income tax revenue did not necessarily come from the upper income profiles or corporate profits. Meanwhile, although government expenditure to GDP ratio has improved after 2003, capital expenditures and social expenditures other than those in education continue to remain low. Further, the current pattern of fiscal decentralisation does not seem to be effective in addressing the existing disparities. JEL Classification H 200; H 500; H 700 Key Words Indonesia, fiscal policy, public finance, inequality, taxation, revenue, government expenditure, financial liberalisation, IMF debt conditionalities, decentralisation Smitha Francis is Principal Economist, Economic Research Foundation, New Delhi. Email for correspondence: smithafrancis@gmail.com ...
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...Introduction In this essay, we will discuss about Asian financial crisis. This crisis happened in 1997. Thailand, South Korea, and Indonesia are the worst countries that affected. There are two views that created the crisis, one is fundamental view and the other one is panic view. Hot money is money that flows between financial markets to get the highest short-term interest rates possible. Capital inflow is increase in the amount of money available from foreign sources for the purchase of local capital assets such as buildings, lands, and machinery. IMF intervention until now still become controversial, two of well-known economist which are Stiglitz and Sachs said that because of IMF intervention the crisis has become much worse rather than before. Moreover, we will discuss about global crisis, this crisis happened in 2007. This started in US because of housing mortgage, and also credit crunch. The difference between Asia crisis and the Global crisis also will be discussed. Asian Crisis Hot money is “Money that flows regularly between financial markets as investors attempt to ensure they get the highest short-term interest rates possible. Hot money will flow from low interest rate yielding countries into higher interest rates countries by investors looking to make the highest return” (Investopedia, 2011). Capital Inflow is “increase in the amount of money available from foreign sources for the purchase of local capital assets such as buildings, lands, and machinery”...
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...CIMB- Entry into Indonesia WRITTEN BY ANUAR, A.Z, HARBAN, A.A., KOH, E., ROBBEN, G., & EDITED BY SEOW KIAN TAN Background CIMB Group is Malaysia’s second largest financial services provider. It is listed on Bursa Malaysia through Bumiputra-Commerce Holdings Berhad (BCHB). In 2004, the CIMB Group began the process of creating a strong and competitive universal bank anchored by Commerce International Merchant Bankers (CIMB), Malaysia’s largest investment bank. In line with CIMB's forward thinking philosophy, CIMB has acquired stakes in international banks and these subsidiaries have been integrated into the CIMB Group making the CIMB Group the leader in investment banking in Southeast Asia. The majority stakeholder (28.39%) of the CIMB Group is Khazanah Nasional, which is the investment holding arm of the Malaysian Government. Khazanah Nasional also owns a stake in CIMB-Niaga (Khazanah Nasional Berhad, 2010). In just 2 years, CIMB transformed itself from Malaysia’s no. 1 investment bank into a regional universal banking group. CIMB has grown from staff strength of 1,000 in Malaysia to 20,000 in 12 countries while market capitalization has increased from RM6.3 billion to RM19.5 billion. The Group’s total assets grew from RM14.7 billion to RM155 billion with a further RM18 billion being third party funds under management (CIMB, 2010). Objectives and Philosophy CIMB’s objective is to create value by serving the needs of its clients, and doing this with integrity...
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...O C C A S I O N A L PA P E R 178 IMF-Supported Programs in Indonesia, Korea, and Thailand A Preliminary Assessment Timothy Lane, Atish Ghosh, Javier Hamann, Steven Phillips, Marianne Schulze-Ghattas, and Tsidi Tsikata INTERNATIONAL MONETARY FUND Washington DC 1999 © 1999 International Monetary Fund Production: IMF Graphics Section Typesetting: Alicia Etchebarne-Bourdin Cataloging-in-Publication Data IMF-supported programs in Indonesia, Korea, and Thailand : a preliminary assessment / by Timothy Lane . . . [et al.]. — [Washington DC : International Monetary Fund], 1999. p. cm. — (Occasional paper, 0251-6365); no. 178 Includes bibliographical references. ISBN 1-55775-783-6 1. Indonesia—Economic policy. 2. Korea—Economic policy. 3. Thailand—Economic policy. 4. International Monetary Fund—Indonesia. 5. International Monetary Fund—Korea. 6. International Monetary Fund—Thailand. I. Lane, Timothy D. (Timothy David), 1955- II. Occasional paper (International Monetary Fund); no. 178. HC447.I44 1999 Price: US$18.00 (US$15.00 to full-time faculty members and students at universities and colleges) Please send orders to: International Monetary Fund, Publication Services 700 19th Street, N.W., Washington, D.C. 20431, U.S.A. Tel.: (202) 623-7430 Telefax: (202) 623-7201 E-mail: publications@imf.org Internet: http://www.imf.org recycled paper Contents Preface I Overview Timothy Lane and Marianne Schulze-Ghattas References II Background to the Crisis Javier Hamann...
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...The financial crisis which began in July 1997 in the East Asian countries, Thailand, Indonesia, Malaysia and Korea, has had devastating effects on their economies. Growth rates in these countries which were in excess of five percent before 1997, turned sharply negative in 1998 and, at the time of this writing it is not yet clear when these economies will turn the corner and resume positive rates of growth. This paper examines why these countries, which were part of what has been termed "the Asian miracle" and were able to eradicate so much poverty, are now undergoing severe economic contractions, with such harmful effects on their populations. A breakdown of information in financial markets is the key factor that has driven this crisis. After laying out an asymmetric information view of the Asian financial crisis, this paper goes on to use this framework to explore lessons from this crisis. 1. An Asymmetric Information View of the Asian Crisis The financial system plays a critical role in the economy because, when it operates properly, it channels funds from those who have saved surplus funds to those who need these funds to engage in productive investment opportunities. The major barrier to the financial system performing this job properly is asymmetric information, the fact that one party to a financial contract does not have the same information as the other party, which results in moral hazard and adverse selection problems. An asymmetric information view of financial...
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...The financial crisis which began in July 1997 in the East Asian countries, Thailand, Indonesia, Malaysia and Korea, has had devastating effects on their economies. Growth rates in these countries which were in excess of five percent before 1997, turned sharply negative in 1998 and, at the time of this writing it is not yet clear when these economies will turn the corner and resume positive rates of growth. This paper examines why these countries, which were part of what has been termed "the Asian miracle" and were able to eradicate so much poverty, are now undergoing severe economic contractions, with such harmful effects on their populations. A breakdown of information in financial markets is the key factor that has driven this crisis. After laying out an asymmetric information view of the Asian financial crisis, this paper goes on to use this framework to explore lessons from this crisis. 1. An Asymmetric Information View of the Asian Crisis The financial system plays a critical role in the economy because, when it operates properly, it channels funds from those who have saved surplus funds to those who need these funds to engage in productive investment opportunities. The major barrier to the financial system performing this job properly is asymmetric information, the fact that one party to a financial contract does not have the same information as the other party, which results in moral hazard and adverse selection problems. An asymmetric information view of financial...
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...International Business Management Program – Petra Christian University 2012 / 2013 Executive Summary Indonesia is known as one of the developing countries in South East ASEAN. Although Indonesia is still a developing country, it has also known as the largest economy in Southeast Asia and also a member of the G-20 major economies. At World Economic Forum on East Asia, Indonesia president said Indonesia will be in the top ten countries with the strongest economy within the next decade. In fact, nowadays Indonesia proves a very good track record in its economy. Finally, it attracts many countries to build strong relationship with Indonesia. One of the countries that have a strong relationship with Indonesia is United Kingdom. In 2006 Tony Blair, the prime minister at that time, met with Susilo Bambang Yudhoyono (SBY), the president of Indonesia, and agreed upon “the establishment of a regular Indonesia-UK partnership forum”. The first Indonesia-UK forum was held in London on 31 January 2012. This forum results in stronger relationship between two countries as SBY made a state visit to the UK on October 30 to November 3, 2012. In this report, we will discuss the economic behavior of both countries. We will also examine the relationship of both countries’ economic condition. Research for this report included data of both Indonesia and England, such as the currency exchange rate between two countries, balance of payment of each country, interest rate in Indonesia and UK, inflation...
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...Table of content Page Introduction 1 Asian Contagion 1 Emerging Market Crises 3 Meltdown in Thailand 7 The International Monetary Fund 9 Implication for Business 11 Malaysia 13 Preventing and Managing Future Crises 14 Conclusion 16 References 18 Introduction Asian Contagion In March 1997 Asia faced a serious crisis in financial sector. This concern was started from Thailand and has spread to a lot of countries in Asia. Obviously it affected to those countries in economy situation such as currency value. Also called the "Asian Contagion", this was a series of currency...
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...The Development Intelligence Gazette The Development Intelligence Gazette is a news journal that summarizes the most significant political and economic stories related to sustainable economic and democratic development in the world. Comments and questions can be addressed to Joseph Merton at merton.stratintsol@gmail.com. Inside This Week’s Issue United States and the European Union Mild eurozone recession likely in 2012: economists………......................................................................................4 Euro declines in its longest losing streak since 2010..............................................................................................5 Head of Russian Church Urges Action on Vote Fraud Allegation….…………….……………………………..……………….…..…6 Tribute to Václav Havel attracts thousands…………………………………………………………….……………………………….……….7 Middle East Islamists' chance to lead change ............................................................................................................................ 8 Why Islamism Is Winning ....................................................................................................................................... 9 Kenyan troops join AU Somalia mission .............................................................................................................. 10 Asia WH calls for stable transition in North Korea . ..............................................................................................
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