Govt under deadline to protect economy

JAKARTA. Unexpected geopolitical circumstances and unclear resolution of persistent global economic woes have left the Indonesian government with limited room for action. The government said it would have to make serious budget adjustments and speed up legal deliberations to support contingency plans.

Coordinating Economic Minister Hatta Rajasa said the government may have to increase its estimate of the Indonesian Crude Price (ICP) in the revised 2012 state budget to above US$100 a barrel from the current $90. The ICP stood at $115.91 per barrel in January, up $5.21 from December.

“The trend shows that the ICP rate has been rising. Due to the crisis at the Hormuz Strait, the global oil price is nearly $120 per barrel,” Hatta said, referring to Iran’s plan to blockade the strait following US-led international sanctions over complications involving the country’s nuclear ambitions. An estimated 18 million barrels of oil pass through the Hormuz Strait each day, or about 20 percent of the world’s total oil output.

Apart from the so-called “Iran crisis”, the agreement made this week by European Union finance ministers on a second bailout for Greece and its expected impact on demand also helped curb high oil prices. Brent, the benchmark for half of the world’s oil, was little changed in London after European Union finance ministers awarded ¤130 billion ($173 billion) in aid to Greece. Brent oil for April settlement on the ICE Futures Europe exchange in London stood at $119.83 on Tuesday from $121.15 a day earlier, the highest since June 15 according to Bloomberg data.

Threats imposed by geopolitical instability and lingering doubts on economic recovery in the eurozone and the US, are pressuring the Indonesian government to speed up the enactment of the much-
needed financial system safety net (JPSK) law — aimed to ensure that people’s money is secure in times of crisis, not only money held in banks but also in pension funds and insurance.

To achieve the objective, the government will attempt, for the third time, to work together with the House of Representatives to pass the law.

Previously, the House had rejected two submissions from the government on the JPSK. One submission was in the form of a regulation-in-lieu-of-law, while the second was in the form of a bill.

The House’s main reason for rejecting the JPSK bill was a stipulation that gave legal impunity to policy makers involved in the JPSK.

Law and Human Rights Ministry’s harmonization director Nasrudin told reporters that the legal impunity stipulation was no longer included in the bill.

Finance Minister Agus Martowardojo said that all related ministries had finished commenting on the JPSK bill and all relevant ministers would sign off on the bill as soon as possible.

“The bill will then be submitted to the President and then to the House of Representatives. This JPSK bill will allow us to have a complete financial safety net,” Agus said. (Hans David Tampubolon/The Jakarta Post)