Financial Crisis, 2009 Elections, and Security Challenges

by Martin Manurung for SGP's Analysis Corner
Link: http://www.sekurindogroup.com/?n=2&nid=1136

The global financial crisis has obviously influenced Indonesia’s economy. Apart from the plummeted stock exchange indices and the currency rate, we have also witnessed drastic drop of Indonesia’s export demands.

It is the latter that currently brings about enormous impacts on the Indonesian economy, which is mainly based on export of primary products. Take export of Arabica coffee and crude palm oil (CPO) as examples. In North Sumatra alone, from 600 registered coffee farmers, currently it is merely 40 of them who are still in business. These farmers are also in severe condition, which might lead them to bankruptcy if the global demand for coffee keeps decreasing.

The same phenomenon also happens with palm farmers, both big and small. The dramatic drop of CPO prices from IDR 1800/kg (in June) to IDR 350/kg (in October) have caused the farmers a huge loss that no one has ever imagined. Many of them have also stopped harvesting and some let their crops become rotten to avoid further loss.

If nothing is done to help, we will all witness massive bankruptcy of commodity sector in the second semester of 2009. It will also bring about multiple effects, which among others the shutdown of many smaller supporting industries and job cuts. We also know that primary commodity is the main sector of our economy that involves most of our workforce.

Unfortunately, the year of 2009 is very crucial in our country’s political agenda. It is the year when we will have national elections, both in the legislative and executive branches of government. Therefore, having severe economic impacts during the time when political stability and security are badly needed is obviously not an option.

Nevertheless, the choice is in the government’s hand. If they take the global financial crisis’ impacts seriously, then probably some risks can be mitigated. The government must focus on how to tackle the impacts on the ‘real sector’ economy, especially the primary commodity, manufacturing, and infrastructure. Only by taking these sectors seriously can we maintain the purchasing power and subsequently help economic growth. On the other hand, too much focus on the financial sector will only help a small proportion of the population and therefore helps nothing much for the people and the economy.