##slem population ; the largest moslem population in the world. in the future, in line with the upcoming implementation of the aec 2015, competition in the sharia financial industry will be tougher. many constraints to the growth of the domestic sharia financial industry, such as tax issues, still impede the common efforts currently underway. in addition, the development and improvement of the national sharia financial industry competitiveness still requires the support of infrastructure : institutions, regulations, a sound legal framework, human resources and market infrastructure. to fill this void solid coordination is required by us all. in support of such coordination bank indonesia will formulate a grand strategy for national sharia financial industry development, through collaboration with other related institutions. bank indonesia will also review various aspects related to the strategy and implementation of monetary policy in our economy that uses a double financial system, namely conventional and sharia. 1. 2 strengthening monetary policy effectiveness ladies and gentlemen, there have been many sections of my talk here this evening that emphasize how rapid the changes are happening around us. to survive amidst such conditions there is no other option but to adapt by making the necessary improvements to mitigate our problems and weaknesses. in the monetary sector, one of the policy strategies we consider necessary for continuous review and improvement is the effectiveness of itf implementation. from the assessment results of itf implementation over the past three years, the opportunities to optimize existing strategy effectiveness remain wide open. this is primarily due to liquidity management, predominantly performed through 1 - month sbi issuance that still triggers fluctuations in available liquidity in daily money market, high interest rate volatility and a steep short - term yield curve in the money market. these factors do not effectively promote portfolio management efficiency in financial institutions and further encourage them to seek profit by utilizing the difference in the shortterm interest rate. high fluctuations in the money market interest rate also exacerbate the uncertainty surrounding the liquidity of financial institutions that invest their funds in longer term assets than the source of funds. in other words, the cost of being temporarily illiquid becomes expensive. market players tend to be short - term orientated which, in turn, distorts monetary policy transmission and is also inefficient in promoting the role of the financial market in the economy. steps to improve monetary policy effectiveness that we envisage are basically tactical move deemed necessary to optimize the effectiveness of monetary policy implementation under itf. in its implementation, this tactical move

their creditworthiness, thereby creating an incentive to complete a restructuring. aside from the indra scheme, the jakarta initiative was established to help facilitate the meetings between debtors and creditors, and a special task force to help banks restructure their assets was also set up. we should expect that the restructuring of companies will take place along with the restructuring of the banks, and they should be strengthening each other ’ s progress. 13. as a final remark, bank restructuring formed a complete set of economic recovery program together with : ( i ) the corporate debt restructuring, ( ii ) monetary and macroeconomic stability, and ( iii ) improvement of public and private sector governance. the third point i just mentioned, namely improvement of governance is a very important aspect that needs to be worked out in the near future. the task of restructuring banks and corporations, and improving crucial aspects of governance will be made much easier in a stable macroeconomic environment. so, managing aggregate demand is a crucial task for the government. here, bank indonesia needs to continue to play a very important role. it is believed that as inflation declines, and the rupiah remains stable, the interest rates will decline gradually, easing the pressure on the corporate and banking sectors. we have seen some encouraging signs. the road ahead may not be that smooth, but we are cautiously optimistic that the crisis has hit its lowest level and we are beginning the climb back to a stable and healthy economy.