Indonesia should continue with its structural reform agenda in the coming months to

strengthen its economic fundamentals, as global uncertainty was expected to ease this
year, a senior Bank Indonesia (BI) official has said.

One of the key issues that needed to be addressed was managing the current account
deficit, which was blamed for the rupiah's steep fall last year.

A current account deficit means that a country is spending beyond its means in terms of
foreign exchange liquidity, causing a reliance on external financing like foreign direct
investments and portfolio investments. Portfolio investments are usually sensitive to
global market sentiments.

Considering that Indonesia was a net oil importer, BI Deputy Governor Mirza Adityaswara
said it needed to step up renewable energy outputs and reduce its dependency on fossil
fuels as a priority of the structural reform agenda.

“As a country that continues to grow, we obviously need more energy. So, it’s about how
to diversify our energy sources to be independent of imported fossil fuels,” Mirza said in
Jakarta this week.

The oil and gas deficit has weighed heavily on Indonesia’s overall trade balance. The
country recorded a deep trade deficit of US$8.57 billion last year, driven by a $12.4 billion
deficit in the oil and gas industry, according to Statistics Indonesia (BPS).

In the first two months of 2019, the oil and gas industry posted a deficit of $886 million,
exceeding the non-oil and gas trade surplus of $152 million in the same period.

Mirza said that last year's large trade deficit was caused by a decline in the prices
of Indonesia's export commodities and larger imports of capital goods due to the
government’s infrastructure drive, which was necessary in going forward to boost growth
in gross domestic product (GDP).
The country imported $6 billion in capital goods for infrastructure alone, according to
calculations from the central bank’s statistics department.

The 2018 trade deficit had widened the current account deficit to 2.98 percent of GDP, or
$31.1 billion.

BI expected the current account deficit to be the one remaining factor that would pose a
risk to the rupiah’s stability this year, said Mirza, as inflation remained under control and
the United States Federal Reserve was nearing the peak of its tightening cycle.

The current account deficit was expected to narrow to 2.5 percent of GDP this year,
benefiting from the full implementation of several government measures to reduce
imports, such as expanding its 20 percent blended biodiesel ( B20 ) policy and slapping
higher import duties on 1,147 consumer goods.

BI announced its medium-term projection for the current account deficit at 2 percent of
GDP by 2024.

“If we could manage the current account deficit to 2.5 percent or even 2 percent of GDP
[by 2024], we would have a stable situation [in which foreign] funding flows into Indonesia,
as well as a higher rate of GDP growth compared to the current level,” said Mirza.

BI Governor Perry Warjiyo called for more focused and consistent structural reform,
including addressing the current account deficit, to unlock the potential for higher GDP
growth.

“Structural reform policies are crucial. We have to improve our aggregate demand – how
to encourage capital [movement] and improving labor [productivity],” said Perry. “We
have enacted [structural reform policies] and will continue to be consistent with existing
policies.”

Perry said Indonesia needed to direct its structural reform agenda to improve
competitiveness, such as maintaining a conducive investment climate, encouraging
diversification away from commodity-based sectors and improving human capital.

Center of Reform on Economics (CORE) Indonesia executive director Mohammad Faisal

concurred with Perry, saying structural reform policies needed to be enforced
consistently.

“Structural reform need to connect between various policies, such as policy synergy
between the fiscal, monetary and real sectors,” Faisal added.

Reforms should also be directed toward fostering stronger policy linkage within the
manufacturing sector to reduce dependency on imported raw and auxiliary materials, he
said.
Summary Response

In this essay “BI Urges Focused Structural Reform to Boost GDP Growth”, the writer Marchio Irfan
Gorbiano states that Indonesia should continue with its structural reform agenda in the coming months
to strengthen its economic fundamentals. I agree with this statement because our economic conditions is
still weak. Indonesia is still difficult to gain many benefit from multiple sectors.

BI Deputy Governor Mirza Adityaswara said it needed to step up renewable energy outputs and reduce
its dependency on fossil fuels as a priority of the structural reform agenda. I agree with this statement
because Indonesia has so many renewable energy potential which can alter many existing not-renewable
energy like fossils energy.

Mirza also said that last year's large trade deficit was caused by a decline in the prices of Indonesia's export
commodities and larger imports of capital goods due to the government’s infrastructure drive, which was
necessary in going forward to boost growth in gross domestic product (GDP). In this Jokowi’s era of
government, there are lots of infrastructure building done by him. Infrastructures built costs a lot of
money from APBN. So I also agree with this statement.

In the other side, Perry Warjiyo, Governor of BI, said Indonesia needed to direct its structural reform
agenda to improve competitiveness, such as maintaining a conducive investment climate, encouraging
diversification away from commodity-based sectors and improving human capital. I agree with this
statement. If we conduct a good environtment in every business agendas, such as improving
competitiveness, we will gain many benefits from those business sectors.

In summary, I support BI’s idea to urge focused structural reform to boost GDP growth. We could do many
things such as making good environment in business agendas, maintaining renewable energies and so
many more.
artinya
Indonesia harus melanjutkan agenda reformasi
strukturalnya dalam beberapa bulan mendatang untuk
memperkuat fundamental ekonominya, karena
ketidakpastian global diperkirakan akan berkurang tahun
ini, seorang pejabat senior Bank Indonesia (BI) mengatakan.
Salah satu masalah utama yang perlu diatasi adalah
mengelola defisit transaksi berjalan, yang disalahkan atas
penurunan tajam rupiah tahun lalu.
Defisit transaksi berjalan berarti bahwa suatu negara
membelanjakan di luar kemampuannya dalam hal likuiditas
valuta asing, menyebabkan ketergantungan pada
pembiayaan eksternal seperti investasi langsung asing dan
investasi portofolio. Investasi portofolio biasanya sensitif
terhadap sentimen pasar global.
Menimbang bahwa Indonesia adalah importir minyak
netto, Deputi Gubernur BI Mirza Adityaswara mengatakan
perlu meningkatkan produksi energi terbarukan dan
mengurangi ketergantungannya pada bahan bakar fosil
sebagai prioritas agenda reformasi struktural.
“Sebagai negara yang terus tumbuh, kami jelas
membutuhkan lebih banyak energi. Jadi, ini tentang
bagaimana mendiversifikasi sumber energi kita agar tidak
bergantung pada bahan bakar fosil yang diimpor, "kata
Mirza di Jakarta minggu ini.
Defisit minyak dan gas sangat membebani neraca
perdagangan Indonesia secara keseluruhan. Negara ini
mencatat defisit perdagangan yang dalam sebesar US $
8,57 miliar tahun lalu, didorong oleh defisit $ 12,4 miliar di
industri minyak dan gas, menurut Statistik Indonesia (BPS).
Dalam dua bulan pertama 2019, industri minyak dan gas
mencatat defisit $ 886 juta, melebihi surplus perdagangan
non-minyak dan gas sebesar $ 152 juta pada periode yang
sama.
Mirza mengatakan bahwa defisit perdagangan besar tahun
lalu disebabkan oleh penurunan harga komoditas ekspor
Indonesia dan impor barang modal yang lebih besar karena
dorongan infrastruktur pemerintah, yang diperlukan untuk
maju untuk mendorong pertumbuhan produk domestik
bruto (PDB).
Negara mengimpor barang modal $ 6 miliar untuk
infrastruktur saja, menurut perhitungan dari departemen
statistik bank sentral.
Defisit perdagangan 2018 telah memperluas defisit neraca
berjalan menjadi 2,98 persen dari PDB, atau $ 31,1 miliar.
BI memperkirakan defisit transaksi berjalan menjadi satu-
satunya faktor yang tersisa yang akan menimbulkan risiko
bagi stabilitas rupiah tahun ini, kata Mirza, karena inflasi
tetap terkendali dan Federal Reserve Amerika Serikat
mendekati puncak siklus pengetatannya.
Defisit transaksi berjalan diperkirakan akan menyempit
menjadi 2,5 persen dari PDB tahun ini, mendapat manfaat
dari implementasi penuh dari beberapa langkah
pemerintah untuk mengurangi impor, seperti memperluas
kebijakan campuran 20 persen biodiesel (B20) dan
menampar bea impor yang lebih tinggi pada 1.147 barang
konsumen .
BI mengumumkan proyeksi jangka menengah untuk defisit
neraca berjalan sebesar 2 persen dari PDB pada tahun 2024.
“Jika kita dapat mengelola defisit neraca berjalan hingga 2,5
persen atau bahkan 2 persen dari PDB [pada tahun 2024],
kita akan memiliki situasi yang stabil [di mana asing]
pendanaan mengalir ke Indonesia, serta tingkat
pertumbuhan PDB yang lebih tinggi dibandingkan dengan
level saat ini, ”kata Mirza.
Gubernur BI Perry Warjiyo menyerukan reformasi
struktural yang lebih fokus dan konsisten, termasuk
mengatasi defisit transaksi berjalan, untuk membuka
potensi pertumbuhan PDB yang lebih tinggi.
“Kebijakan reformasi struktural sangat penting. Kami harus
meningkatkan permintaan agregat kami - bagaimana
mendorong [pergerakan] modal dan meningkatkan
[produktivitas] tenaga kerja, ”kata Perry. "Kami telah
memberlakukan [kebijakan reformasi struktural] dan akan
terus konsisten dengan kebijakan yang ada."
Perry mengatakan Indonesia perlu mengarahkan agenda
reformasi strukturalnya untuk meningkatkan daya saing,
seperti menjaga iklim investasi yang kondusif, mendorong
diversifikasi menjauh dari sektor berbasis komoditas dan
meningkatkan sumber daya manusia.
Direktur Eksekutif Pusat Reformasi Ekonomi (CORE)
Indonesia Mohammad Faisal sependapat dengan Perry,
mengatakan kebijakan reformasi struktural perlu
ditegakkan secara konsisten.
"Reformasi struktural perlu menghubungkan berbagai
kebijakan, seperti sinergi kebijakan antara sektor fiskal,
moneter, dan riil," tambah Faisal.
Reformasi juga harus diarahkan untuk mendorong
keterkaitan kebijakan yang lebih kuat dalam sektor
manufaktur untuk mengurangi ketergantungan pada bahan
baku dan bahan pembantu impor, katanya.