economy will reach a relatively stable level and thus liquidity of the banking sector can be relaxed. third, bank indonesia will work steadily to improve public access to sharia banking services. we are preparing a regulation that permits branches of conventional banks with a sharia unit to also provide sharia transactions through office channeling. by providing office channeling at conventional branches, banks will no longer need to open sharia unit branches in numerous locations to offer sharia banking services. fourth, bank indonesia will pursue efforts to expand the coverage of banking services with focus on the micro, small, and medium enterprises ( msme ) sector for more equitable outreach extending to all remote areas. we will take several steps to realize this policy particularly by empowering the role and functions of the banking sector in providing the service truly needed by the msme. the mapping survey conducted clearly shows that the msme sector has a high resilience level. profit levels of this sector is in the range of 10 – 50 %, and profit levels of 50 % is achieved by 30 % of business in the msme sector. it is clear that the msme sector is prospective in terms of credit and business management, and more importantly, there is a relatively big portion of this sector that is capable to absorb and conduct healthy principles of economics without the need for subsidies. we will continue the mapping survey in 2006 to identify msme sectors which truly holds potential and capacity to grow and develop. the results of the mapping process will then be synchronized with the basel ii concepts to accommodate the need to finance the msme sector. basel ii provides special treatment to the retail portfolio by assigning a lower risk weight, assessments toward debtors in this group on a portfolio basis, and requiring a more flexible criteria towards developments in the economy and accommodate financing issues of small businesses. in this regard, we will make adjustments in risk weighted assets for certain retail business, including risk weighted assets calculations for financing the micro and small sector. we hope that through this step, the banking sector will have a regained sense of enthusiasm and more room to provide financing support to various businesses in this sector. distinguished guests, ladies and gentlemen : god willing, we will issue regulations regarding to the revision to bank indonesia regulation 7 / 2 / 2005. office channeling, and msme this month. distinguished guests, ladies and gentlemen for the intermediate to long term, we will focus all regulations and policies towards the strengthening of banks operational factors and the implementation of prudential principles.

exchanges liquidity by improving exports performance and capital inflows. • fourth, the need to think of ways to lessen our dependency on fuel products. in this regard, the development of alternative energy sources and public transportation with low levels of fuel consumption will become a must in the years to come. distinguished guests, ladies and gentlemen : stepping into year 2006, it is common that in entering the new year, we would define the expectations we want to achieve as well as identify challenges we hope to overcome within the coming year. in my view, the major challenge we will face in 2006 will be to bring the economy to a new equilibrium. from the external point of view, several international institutions have projected that the growth prospects for the world economy will not change much. it will remain at around 4. 3 %, with america and china still as the main engine in the global economic growth. based on those external conditions, we predict that the dynamics of the 2006 economy will largely depend on coordination between monetary, fiscal, and the real sector ’ s policies. such coordination needs to be done optimally to manage macro economy stability while promoting economic growth. • from the monetary side, bank indonesia will consistently make efforts to reduce the rate of inflation to a single digits in 2006 to allow interest rates to be gradually lowered in order to boost consumption and private sector investment. • from the fiscal side, fiscal stimuli through government consumption and investment would provide a strong jump start towards economic recovery, especially if the government could make use of the unrealized 2005 budgeted spending, carry it forward to 2006 and immediately make it realized within the first quarter of this year. • from the real sector side, economic prospects will be more dynamic if the previously planned infrastructure projects can be realized. if coordination of these policies is able to be conducted coherently, we will see an improved economic growth supported by the needed investment and consumption levels from the second semester of 2006 overall, bank indonesia projects that the 2006 gdp will reach 5. 0 - 5. 7 %. growth of that level is predicted to be achievable if investment financing sources from both domestic and abroad can be secured. aside from stimuli provided by government ’ s capital expenditures, i expect the banking industry to continue its role in funding long - term investment projects. an optimistic level of economic growth may be achieved if the banking industry at least maintains last year ’ s level of credit extensions. foreign sources are also assumed to play a significant role as well. it was noted