Darmin Nasution: Building efficient equilibrium towards sustainable
growth
Speech by Dr Darmin Nasution, Governor of Bank Indonesia, at the Bankers' Dinner,
Jakarta, 9 December 2011.
* * *
Respectable Members of Parliament,
Prominent Bankers, Businessmen and Dignitaries,
Distinguished Guests, Ladies and Gentlemen,
Assalamu'alaikum Wr. Wb,
Good Evening and May God Bless Us All,
To open my speech here today held in such salubrious settings, I would like to invite you all
to join me in expressing thanks and praise to God Almighty who has blessed us again with
the opportunity to congregate here for the Bankers' Dinner at the end of 2011.
In distinction from the previous Bankers' Dinner's tradition usually held in the opening of a
new year, this 2011, we have decided to organize this annual event at the closing of the
year. By doing so, it is sincerely hoped that we have ample time to reflect on the success and
failure over the past year as well as to discuss our expectations, risks and challenges to draw
commitments ahead of time.
Distinguished Guests, Ladies, and Gentlemen,
It has come to our common understanding that changes in the constellation of the global
economy since the global financial crisis of 2008 and its aftermath had left a profound and
widespread fright. Against the backdrop of lingering effects from the global financial crisis,
significant challenges in managing an increasingly complex macroeconomic stability has
risen considerably. External shock and uncertainty seem becoming a constant dimension
that incessantly shadows us along with the prevailing shifts and changes.
In this current era of globalization, every formulation and implementation would be
surrounded by some degree of uncertainty. However, it is believed that every open economy
such as Indonesia will be constantly challenged by different external shocks over time. The
problem is we do not know when, how big and through which channel the shock will happen.
Nevertheless, we should be grateful. Despite the uncertainties, our economy has shown
stronger performance this year compared to last year. Solid collaboration and close
coordination, based on common understanding, have become fundamental elements in
achieving and maintaining the successful management of our economy.
Therefore, prior to delivering the main substance of my annual address this evening, please
allow me to express my sincere appreciation and thanks to the banking community, all
elements of the Central and Local Government, the Parliament, business community,
academics, observers, the media and all other parties that I am, unfortunately, unable to
acknowledge individually, who have been so incredibly supportive of Bank Indonesia in
fulfilling its duties.
For me personally, my journey in leading Bank Indonesia, a state institution with legal
mandate to maintain national macroeconomic stability, is extremely precious and cherished
experience. The experience in this arduous journey through labyrinths of trials and
tribulations, has bestowed upon me a deeper understanding of our economic dynamics.
Hence, as citizen of this great nation myself, the mandate has also provided great honor and
opportunity for me to pay homage to our nation and all Indonesians by always giving my
best.
This evening, the time has come for me to reflect on what Bank Indonesia has achieved
during the years of my leadership and communicate the plans and strategies beforehand by
presenting my views regarding the economic prospects and challenges to be faced in the
years to come and their implications on Bank Indonesia. I genuinely hope that the future
perspective I plan to present here this evening can serve as a contribution for us all in
determining some common measures to achieve a better national economic future. For that
reason, the theme of my speech this evening is "Building Efficient Equilibrium towards
Sustainable Growth."
Distinguished Guests, Ladies, and Gentlemen,
By the theme, I would like to bring your thoughts and views to meditate over the question on
how we suppose to place the function and role of banking industries in achieving economic
development goals. In particular, I am asking all of us here to contemplate on how to heal
from inefficiency disease that has hindered our economy from growing higher and more
sustainable. Only by such sustaining growth, then the problem of poverty and unemployment
can be solved altogether.
It is technically believed that high and sustainable growth often refers to potential economic
growth. Based on our estimate, the potential growth of Indonesian economy is around 7%,
provided that investment could grow by 12% per year.
However, to achieve sustainable economic growth, two conditions have to be satisfied. First,
there should be a continuous condusive macroeconomic environment. Second, capital
accumulation and total factor productivity should grow so that economic capacity and
competitiveness would steadily increase. Capital accumulation can be achieved through
investment in the form of machinery, plants, research and development and human capital.
The sustainability of investment is influenced by multiple factors, such as profit expectation,
investment climate, and not less important, the availability of financing. For Indonesian
economy, the scarcity of financing is among the most binding constraints of investment
activity. This has been reflected in the latest surveys on sectoral mapping and on business
condition. More specifically, the surveys pointed to financing constraint suffered by business
players, particularly difficulties in accessing bank loan, resulting from too high lending rate,
too demanding collateral obligation, and too complicated administrative requirement.
Reflecting on the survey results, I would like to invite all of us to retrospect on the place and
role of banking industry. There is no doubt that banking industry has its strategic role in our
national economic chain. Looking back into its evolution through innumerable crises and
elongated learning curve, it would not be excessive to say that our banking industry should
have been transformed itself into better banking industry as expected by the public.
The public craves for banking industry that is not only sound and robust, but also capable to
effectively and efficiently participate in financing the economy. The establishment of sound
and robust banking industry on the one hand, and its successful in performing their
intermediation function effectively and efficiently on the other hand, are two things that
cannot stand apart. It's like two sides of a coin. It is possibly there is a trade-off between the
two, but we can certainly find the optimum point between the two.
We cannot remain silent, static and satisfied too soon, believing that our banking industry
has reached a good equilibrium, while we know that banking industries in other Asian
countries continue to pursue improvement and transform for the better to attain the real
equilibrium of sound, robust, and efficient banking industries. If it is the bad equilibrium that
prevails, then we will face difficulties and hardships in coping up with the imminent
challenges laid bare before us in welcoming The ASEAN Economic Community (AEC) by
2015.
When we do not have the capability to compete in the globalization era, we become less
compatible with other nations. Consequently, we become less able to benefit from
globalization and only accept-induced harm.
Distinguished Guests, Ladies, and Gentlemen,
Amidst the increasingly strong currents of globalization, I see 2011 as a fascinating and
worthy of note year. Throughout 2011, we have booked numerous successful achievements
which bring immense satisfaction. Yet, the year is also full of dynamics and mounting
challenges that have transformed us to become a relatively more matured entity in managing
our national economic stability.
In managing our national economy during the year 2011, global fluctuations and uncertainty
seem to be a constant threat looming incessantly over us. The uncertainty of European
mechanism for sovereign debt crisis resolution and widespread fears of the lingering global
recession have become two epicenters triggering turbulence and unrest in the global
financial markets during 2011. In closely following up the European debt crisis, we
experience an infinite uncertainty of walking into dark abyss. We do not know yet how
profound and how much longer the European debt crisis will continue to last because the
dimension of the crisis is significantly extensive and complex. At present, there are negative
events producing more negative events in a reinforcing vicious cycle (adverse feedback loop)
as reflected in the government debt crisis, worsening fragility of banking industries, and the
simultaneous slowdown in economic activity which in turn escalates the crisis into precipitous
and prolonged crisis.
Meanwhile, the U.S. economic recovery appears to remain stagnant due to the restricted
maneuverability in fiscal policy to stimulate economic activity. The combination of a relatively
constrained fiscal policy and economic slowdown has naturally compelled them to pin their
hopes on their central bank as the savior of the economy.
However, the diminishing room to cut interest rate has coerced central banks like The
Federal Reserve to invent creative policies to stimulate economy through "quantitative
easing". As an emerging market country, we, too, suffer the blows of such measure in the
form of two-way cross border capital flows.
Retrospect to these highlights, it is not my intention to discourage us into a pessimist in
looking up to the future. Quite the opposite, these highlights are presented to make us
continue to be vigilant and devise stretched policy frameworks to withstand large adverse
shocks in anticipation of global imbalances and uncertainty in the coming year that is
predicted to be no much better than the current condition. We are also required to make
adjustments and re-alignment over the prevailing forecasts.
Distinguished Guests, Ladies, and Gentlemen,
We should be grateful, in the midst of unrelenting global turmoil; the resilience of financial
sector and national economy has been increasingly demonstrated robustness. At least,
during 2011 the Indonesian economy has managed to insulate itself from the spillover effects
of European debt crisis through trade channel due to its robust basis of largely domestic
demand-driven economy within our economic structure.
Despite having successfully safe-guarded our financial system integrity, we believe that its
spillover effects through financial markets channel had been felt ever since the start of the
Greece's fiscal crisis in mid 2010. In early 2011, a period in which optimism over the global
economic recovery flourished, massive capital inflow flooded our market, thus rupiah was
greatly appreciated. However, this optimism faded instantly in April and May 2011 following
the credit rating downgrades for Portugal and Greece by Fitch.
In early September 2011, the scale of the crisis pressure escalated to Italy and Spain,
prompting investors to reassess (repricing) the investment risk profiling and reposition the
portfolio in emerging market assets, including in Indonesia. We have witnessed how rupiah
has been considerably under pressure in the last three months amidst foreign currency
excess demand situation.
Amidst imbalances of foreign exchange supply and demand within these last three months,
Bank Indonesia has maintained a steady pace of rupiah depreciation in a relatively measured
scale against regional currencies. The obtained range of fluctuations in exchange rates
aligns consistently with the internal and external macroeconomic balance that create
conducive atmosphere in providing greater certainty for business players in the real and
financial sectors regarding the average exchange rate in the long run.
Distinguished Guests, Ladies, and Gentlemen,
We have been closely monitoring that amidst massive pressures on global financial markets,
our economy had bred strong resilient forces that make it more apt to mitigate external
turbulences. This heartening situation has provided us some space to direct various
macroeconomic indicators into the right track (on-track). Domestic household consumption
expenditure remains strong, while investment and exports continue to rise. In spite of this,
the inconsequential realization of fiscal capital spending has led to situation in which
multiplier effects of fiscal operations towards limited Gross Domestic Product (GDP) is still
inadequate.
With the ever-increasing investment, the investment ratio to GDP rose to 31.3% compared to
23.6% in 2005. The increased investment was also reflected in increased imports of capital
goods mainly in the form of machinery, the high growth in investment lending, and the
expansion of Foreign Direct Investment.
The increasing role of investment and export has paved the way to the well-maintained of a
balanced economic growth in 2011. For 2011, the Indonesian economics is projected to grow
6.5%, surpassing the achievements of 2010 at 6.1%. Corresponding to the increased
investment, manufacturing industry is projected to grow by 6.1% (yoy), offsetting the growth
in the extractive sectors such as mining. It is heartening to note that the expansion of
manufacturing industry has boosted absorption of workforce in formal sector. Consequently,
unemployment rate fell to 6.6% in August 2011 from 7.1% in August 2010.
Portrayal of our success in maintaining exceptionally high economic growth even during the
recent global downturn is deemed satisfactory with the Consumer Price Index (IHK) inflation
remained under control. The IHK inflation is forecasted reached only 3.9% (yoy). Meanwhile,
core inflation remains steady in these past three-years at around 4.0% which indicates that
the economy is yet operating below its potential growth. This occurs because an increased
production capacity is simultaneously correspond with increased investment.
I perceive this trend as a good start because it means capital accumulation process is on the
lead to buttress the effectiveness of the productive capacity expansion of the economy. Our
latest assessment on the phenomena of supply side constraint points to the fact that the
sensitivity of price increase (core inflation) to growth increase has declined during the last 5
year, particularly compared to early 2000s.
Distinguished Guests, Ladies, and Gentlemen,
In the midst of sluggish economic recovery in developed countries and commodity price
correction within global market, Indonesia's exports performance remains solid. Exports grew
28.2% during 2011. We can take advantage of the increased intra-regional trade in Asia; so
that adverse effects of the economic slowdown in developed countries can be compensated
by increased exports to Asian countries having high economic growth such as China and
India.
In the meantime, imports continued to grow rapidly (30.4%) as a consequence of accelerated
economic activity. I conclude that the rising imports performance is still within a relatively
safe and healthy outlook because it is likely associated with the imported raw materials and
capital goods to spur increased production capacity.
Meanwhile, the quality of capital inflow structure is significantly improving with the increased
foreign direct investment (FDI) exceeded portfolio investments. Overall, in 2011, the balance
of payments booked surplus of USD 12.6 billion and foreign reserves rose to USD 111.0
(December 7, 2011).
Distinguished guests, ladies, and gentlemen,
The financial system stability preserved in the midst of global turbulence is also attributable
to the resilience of our banking industry, which is increasingly able to absorb instability risks
while maintaining its intermediation function.
Improvement in capital and consistent implementation of bank prudential principles appear to
be effective in avoiding drastic deterioration in the industry. This is reflected in the low gross
non-performing loan (NPL) ratio, reaching only 2.7%, far below the indicative threshold of
5%, while capital adequacy ratio (CAR) was recorded at 17.2% at end of October 2011.
Despite pressures on domestic foreign exchange market, the rupiah liquidity condition in the
interbank money market (PUAB) remains unaffected, while banking liquidity also continues to
be adequate. Third party fund (DPK) in 2011 (up the October) grew 19,0% yoy, while ratio of
liquid assets to non-core deposits was kept above 100% (182.0%) as of October 2011.
The banking intermediation function is managed to run as planned. In 2011 credit growth
reached 25.7% (yoy), while loan to deposit ratio (LDR) rose to 81.4% as of October 2011
from 75.5% at end 2010. The quality of the credit growth escalates as credit to productive
sectors increases reflected by growth of investment credit that reached 31% as of October
2011.
In addition to the enhanced ability to absorb risks, our banking industry is also able to gain
large amount of profit, in fact the largest among ASEAN countries. In October 2011, return
on assets (ROA) of the banking industry stood at 3.11%, far above ASEAN average of
1.14%.
Meanwhile, for Islamic banking, based on a survey conducted by BMB Islamic Finance,
Islamic business and management consultancy based in London, Indonesia Islamic financial
industry occupied the 4th position in the world after Iran, Malaysia and Saudi Arabia. Indeed,
this is a very satisfactory achievement.
In September 2011, total assets of Islamic banking has reached Rp 126, 6 trillion or 3.8% of
total national banking assets, grew by 47.8% (yoy) and the highest in the last 3 years. The
average CAR of Islamic Banks (BUS) and Sharia Unit (UUS) grew at 16%, while the average
Capital adequacy Ratio (CAR ) of Islamic Rural Bank (BPRS) 24.7% . In the rural banks
group, in late October 2011 a year on year assets grew by 20.56%, credit 20.96%, third party
fund (DPK) 21.31%, and the number of deposit accounts grew 9.72%, while Capital
adequacy Ratio (CAR), in late October 2011 grew 28 , 58%.
Distinguished guests, ladies, and gentlemen,
I view the positive achievement of the national economy in 2011 as a result of hard work and
strong cooperation among stakeholders, which is supported actively by the banking
community, business agents and the general public.
In this opportunity, I would like to highlight several policy actions taken by Bank Indonesia in
confronting the national economy dynamics during 2011. On the monetary side, Bank
Indonesia's policy in 2011 is basically a strengthening of previous year's policy mix, but
further calibrated to the dynamics and challenges of the economy during 2011.
Interest rate policy throughout 2011 is directed to be consistent with the predetermined
inflation target of 5%±1% and 4,5%±1% in 2011 and 2012, respectively. In February 2011
Bank Indonesia increased BI Rate by 25 bps to 6.75% as a response to intensifying inflation
expectation, which is attributable to high volatile food inflation.
Since September 2011, the monetary stance is turned to an easing phase, by decreasing the
lower limit of interbank money market interest rate corridor. Further in October and
November 2011, Bank Indonesia lowered BI rate by 25 bps and 50 bps, respectively to arrive
at the 6.0% level. The decision to lower BI Rate is indeed quite delicate since it has to be
taken in the middle of ongoing turmoil in the global financial market and against the market
mainstream. However, we have strong belief supported by highly fundamental consideration.
Since mid 2011, we have been convinced that CPI inflation would move down, possibly even
reaching below the 5±1% target. On the other hand, we need to lay stronger basis for
domestic demand in anticipation of global economic slowdown. It can be noted that this year
Bank Indonesia is ahead of the curve by being the first central bank in Asia to lower policy
interest rate.
We view that the national economy should also be ring-fenced from instability sources such
as short term capital flows. In addition, the structure of capital flows needs to be amended by
shifting it to longer instruments. Therefore, on 13 May 2011, the SBI's holding period is
extended to 6 months from previously 1 month. This policy proves to be effective in halting
capital inflows into SBI and shift foreign capital investment to government securities market.
Distinguished guests, ladies, and gentlemen,
Experience demonstrates that crisis management often bears extremely high economic and
social cost and involves long recovery. Against this background, Bank Indonesia also
implemented Crisis Management Protocol (CMP). However, the CMP needs to be equipped
with proper guidance and legal basis which regulate crisis prevention and resolution process
in a systematic and integrated way on a national scale, through Financial Safety Net Law.
Financial crisis generally starts with liquidity squeeze in the interbank market, market interest
rate hike, and exchange rate pressure. For that reason, we intensify monitoring on financial
market transactions, especially to scrutinize vulnerabilities that would lead to financial crisis.
Through the developed monitoring system, we wish to ensure the adequacy of rupiah and
foreign exchange liquidity in the financial market, as well as to maintain exchange rate
stability. Therefore, we conduct a combination of intervention in the foreign exchange market
and acquisition of government securities (SBN) in the secondary market. This policy is quite
effective in stabilizing the exchange rate and SBN price, while also increase SBN
accumulation in Bank Indonesia for monetary operation purpose (Reverse Repo).
In order to maintain the stability of the exchange rate, we also need to seek long-term policy
breakthrough by ensuring sustainable supply of foreign exchange.
Against this background, at end September 2011, we took the initiative to issue a regulation
to obligate export proceed and proceed from external debt to be deposited in domestic
banking system.
This policy can be considered soft compared to those in Thailand and Malaysia, who has
regulated tightly foreign exchange flows related to exports and imports since decades ago.
We have been taken hostage for too long by market mechanism, which in fact lead to market
imperfection, and we need to correct it.
Considering the significant role of inflation from the supply side problem, Bank Indonesia has
been in close coordination with the government to preserve price stability, particularly
resulting from volatile nature of commodities prices and government's decision on
administered prices.
Bank Indonesia has taken steps to increase the role of Inflation Control Teams, both in
national and regional levels. Additionally, Bank Indonesia regional representative offices
have also routinely published Regional Economic Study which serves as outlets of various
aspects of the regional economy.
Distinguished guests, ladies, and gentlemen,
On the banking area, within 2011 bank Indonesia has pursued several policies framed by
four pillars, namely:
a. Policy to boost banking intermediation role, to enable more efficient and transparent
intermediation, as well as to open access of low-income community to financial
services. Included in this policy is the policy on Transparency of Information on
Primary Lending Rate and the continuation of financial inclusion program. I put
strong attention this strengthening of banking transparency, which is expected to
lead up to efficiency. First, a transparent banking industry would encourage healthy
competition through better market discipline. Second, it would increase banks' ability
in identifying aspects that influence cost structure such that higher efficiency level
can be achieved.
b. Policy to enhance banking resilience, so that banks remain strong and sound in
confronting competition, through more transparent management that refers to good
governance principles. This policy includes improvement in the calculation of capital
to suit better with risks, and obligate banks to implement anti fraud strategy,
prudential principles in outsourcing and risk management in delivering services to
prime customers.
c. Policy to strengthen supervisory function, aiming at increasing the effectiveness of
bank supervision, especially in terms of the quality of early warning system.
Consequently, we apply improvements to the regulation for bank reporting to Bank
Indonesia.. Meanwhile, to enhance the effectiveness of resolution to banking
problems, we impose deadline for every bank supervision status through the
regulation of "Determination of Status and Follow-Up Supervision."
d. Strengthening of macroprudential policy. This policy is aimed to strengthen financial
system stability through better implementation of macroprudential surveillance.
Included in this policy is increase in foreign exchange reserve requirement and
LDRreserve requirement.
In the mean time, policy on syariah banking in 2011 continues to be pursued in terms
harmonization of regulation with conventional banking, relaxation of regulation, and
implementation of Law No.21 Year 2008 on Syariah Banking. Among the issued regulation is
regulation on asset quality for syariah commercial bank, syariah business unit, and syariah
rural banks, financing restructurization, and risk management for syariah commercial; bank
and syariah business unit.
We also support research, training and facilitation of SMEs though policy and strategy to
"Enhance SME's Access to Banks" and "Encourage Banks to finance SMEs". This policy is
aimed to enable SMEs to enhance its eligibility and capability so that they can meet banks
requirements (bankable), while also boosting regional economy capacity.
With intensifying payment transactions through means of payment such as credit card,
ATM/debit card, and e-money, we pursue a number of policies to ensure the establishment
of safe and efficient payment system.
This policy includes among others standardization of chip-based ATM/Debit Card,
establishment of national payment gateway and standardization of electronic money.
Distinguished guests, ladies, and gentlemen,
It is important for me to say that we cannot and may not assume that our macro stability will
definitely continue in the future. This assumption can lead us to comfort zone that would
reduce our ability to anticipate future challenges early on.
For that reason, allow me in this part to highlight views on the challenges confronted by our
economy, which requires hard works from all of us to anticipate and address them in 2012.
The increasingly difficult external challenge is related to vulnerability and recovery of the
global economic recovery, which may be worse than predicted (downside risk). This is
considering the complexity of European debt trap which definitely will affect global economy.
IMF has just revised 2012 global growth from 4,0% to only 2,0%.
On the one hand, with the dismal global picture, national economic machinery will depends
on effectivity of domestic absorption and the ability to benefit from local markets. In
connection to that, the capacity to preserve growth momentum will be limited should banking
intermediary and fiscal expenditure absorption are sub-optimal.
On the other hand, combination among global economic deterioration, low interest rate, dan
global excess liquidity, tends to shift global portfolio allocation. Such situation is a source of
instability which challenges emerging markets' authorities in sustaining its financial stability.
As a domestic challenge, we have a lot of homework to finish. Some of them are old issues
we never solve and thus have created inefficiency in the economy. In financial sector,
national banking industry after 1998 has been more vigilant. However, its contribution for
economic development is still in the margin. If we look at the statistic, Indonesian banking
asset to GDP ratio has reached 47,2% in September 2011. However, credit to GDP ratio is
only 29,0%. As comparisons, credit to GDP ratios in the region vary, with Malaysia, Thailand
and China recorded 111,4%, 117,0%, and 131.0%.
Opinions of business players provided a similar picture. From Bank Indonesia recent survey
on "how to finance your company", the proportion of bank loan in total financing is very low,
that is only 25% for working capital, and only 21% for investment. On the contrary, intental
financing has been the main source of financing, 48% for working capital and 61% for
investment.
In other words, it seems that the large asset size in banking industry is not followed by high
contribution to the economy. This is also because there is a substantial portion of banking
assets that are not productive from macroeconomic point of view. Those are ones in the
forms of monetary instruments (Fasbi, TD, SBI) and government debts (SBN). The size of
banks placement in monetary instruments and government debt securities are
Rp 415.48 trillion and Rp 245.97 trillion, respectively, as of end of October 2011. In total, they
constitute 31.4% of the total credit of Rp 2,106.2 trillion. About 60% of Bank Indonesia
monetary instruments are currently held by the 10 biggest banks. Moreover, it seems that to
preserve high probability, banks charge high lending rates to customers, partly also to
compensate for the generally lower rate from placement in monetary instruments and
government securities.
The low efficiency of banking industry has also contributed to high lending rate. This is
reflected by operational cost to operational revenue ratio (BOPO) of 86.44% as of October
2011. For comparison, the same ratios for ASEAN countries are 40%-60%.
Although intermediation function somehow works, operational inefficiency generate high cost
financing, resulting in low economic competitiveness. Such high financing cost can be
illustrated by lending rate of working capital loan, investment loan dan consumption loan,
which are 12.09%, 11.66%, and 13.40%, respectively, as of October 2011. This is despite BI
rate having reached the lowest ever level of 6.0%. For comparison, with 3.0% policy rate in
Malaysia and 4.5% in the Philippines, bank lending rates in Malaysia and the Philippines are
only 6.5% and5.7%, respectively (October 2011).
The current structural problems which give rise to false equilibrium in the banking industry
can not be solved by market mechanism alone. There is a need to put a corrective policy in
place to bring the system back towards its real equilibrium.
On the real sector side, inefficiency still dominates the conduct of the economy following the
weakness of market microstructure, which eventually hindered market capacity to efficient
allocation of resources. This feature has significant impact on inflation rate particularly on
foodstuff category which tends to be volatile and uneasy to subdued. The fragile
microstructure of staple food markets has significant bearing on two fronts, namely
production and distribution process.
On the production front, the less effective development strategy in the agricultural sector, for
instance, gives rise to imbalances between supply and consumption of rice which
unfortunately has taken place for a long period of time. The recent increase of rice supply
resulted from rice import, seen as a mere short cut solution to the problem.
On the distribution front, the weakness of the market microstructure revolves around (i) the
availability of logistics services, transportation, and transportation infrastructure related to
foodstuff, (ii) the availability of a symmetric market information for suppliers, wholesalers, and
retailers, and (iii) the presence of policy that favors particular market players which eventually
create oligopolistic behavior in the distribution market, as well as rent-seeking activities. The
weakness of the microstructure in the distribution market has caused rising prices in the
consumer level, but not in the producer level.
Distinguished Guests, Ladies and Gentlemen,
The magnitude of challenges we face in the coming years should not discourage our
optimism towards the prospect of the economy. In the future, we must strive to maintain a
high sense of hope and optimism, macroeconomic stability and a strong economic growth
momentum.
Amidst the global economic slowdown, we expect the domestic economy to grow 6.3%-6.7%
in 2012, or slightly lower than in 2011 due to sluggish growth of export. For that reason, we
are able to maintain stronger economic momentum provided that the foundation of domestic
economic growth is strengthened.
We are confident that the lowering of the BI rate since