Survey of Recent Developments

Crawford School of Public Policy | Arndt-Corden Department of Economics | Indonesia Project

Event details

Indonesia Study Group

Date & time

Wednesday 23 February 2011
12.30pm–2.00pm

Venue

Coombs Seminar Room B, Coombs Building, Fellows Road, ANU

Speaker

Ross McLeod (Indonesia Project, ANU)

Contacts

Indonesia Project
+61 2 6125 3794
The general public is becoming increasingly concerned about the gap between policy rhetoric and action. A strong contributor to this has been a long-running corruption saga involving a tax official, Gayus Tambunan, whose activities have helped confirm the public’s worst fears about the ineffectiveness of the anti-corruption campaign. Claims of progress in this and other fields usually are typically grossly overstated, and opinion polls suggest that they have become unconvincing.

Nevertheless, the most recent data reveal a surprising surge of GDP growth, driven by investment spending. Inflation has been quite steady for the last six months, albeit a little above the target range; this is a disappointing outcome rather than a major problem. In response to surging food prices the government has temporarily removed tariffs on rice, wheat and soybeans, and ordered increased rice imports. Energy subsidies continue to weigh heavily on the budget; the plan to remove the subsidy from petrol used in private cars but not from that used in motorcycles makes good political sense, since there are about five times more motorcycle owners than car owners. The budget is unlikely to have a stimulatory impact in 2011.

The composition of exports has altered quite dramatically over the last two decades, albeit in unanticipated directions. The country shares of exports have also undergone significant change, reflecting the growing relative importance of Asia to the global economy. The decision to establish a single authority to supervise the entire financial sector has now been delayed for almost 11 years. But the draft law now under discussion would result in a wasteful and confusing duplication of the role of bank supervision in the new authority. In any case, it remains unclear exactly what establishing the new authority is supposed to achieve.

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