European Journal of Social Sciences ISSN 1450-2267 Vol.30 No.3 (2012), pp. 438-450 EuroJournals Publishing, Inc.

. 2012 http://www.europeanjournalofsocialsciences.com

Impact of the Global Financial Crisis on the Indonesian Economy Further Analysis using Export and Investment Channels1
Hermanto Siregar Department of Economics, Faculty of Economics and Management Senior Scholar, Bogor Agricultural University, Indonesia E-mail: wrsp@ipb.ac.id; hermanto@mma.ipb.ac.id Heni Hasanah Research and Teaching Assistant Department of Economics Faculty of Economics Senior Scholar of Brighten Institute Management Bogor Agricultura University, Indonesia E-mail: heni_hasanah@yahoo.co.id Noer Azam Achsani Department of Economics, Faculty of Economics and Management Bogor Agricultural University, Indonesia E-mail: achsani@yahoo.com; achsani@mb.ipb.ac.id Abstract As a small open economy, Indonesia and other countries which are integrated one and each other cannot escape from the 2008 global financial crisis (GFC). A number of impacts have been experienced by the country including on the stock market, banking sector, international trade, and the real sector. A number of policy responses have accordingly designed and implemented by the government and the monetary authority to tackle the impacts. The result is that the GFCs impacts on the Indonesian economy have not been so significant. The economy has recovered relatively fast. Strong domestic demand has become an important factor to keep the economy moving. For the current situation, it is important for the authorities to keep if not improve the households purchasing power. In a longer term, this has to be matched with increases in productive capacity of the economy. With regard to anticipating the future crises, a crisis management protocol has to be developed and improved continuously. For this to work efficiently there must be effective coordination amongst the related institutions.

Keywords: Global financial crisis, transmission mechanisms of the crisis, vector autoregression, policy responses

Country Paper (Indonesia) presented at the 36th Conference of the Federation of ASEAN Economist Association (FAEA), Kuala Lumpur, Malaysia, 24-25 November 2011.

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1. Introduction
Mid 2008 marked the beginning of an important change in the world economy. Such important change was started due to the default of the subprime mortgage in the US, which has developed to become a global financial crisis (GFC). Indonesia and other countries with the characteristic of small openeconomy of course cannot escape from the market dynamism or the GFC. A high degree of stock markets integration as well as mobile trade flows across countries trigger the crisis to transmit relatively quickly from the source country to the rest of the world. The US subprime mortgage problem occurred because banks had made huge housing credits including to households which actually did not have enough financial capacity. The housing credits had then been securitized in order to attract investors attention. Given huge amount of the credits, when it came to the default the banks had faced difficulties to make payments whereas investors released banks products when the prices were still high. This created liquidity problems. Lehman Brothers as a giant financial institution of the USinvested as much as US$ 60 billions in the property sectorwhich served as intermediary between investors and prospective debtors in the sector announced its bankruptcy after failing to have the assistance from the monetary authority on September 15, 2008. The bankruptcy was quickly followed by falldowns of a number of US financial institutions whose business closely related to the property sector before affecting the entire economy of the US. This forced the US government to do the bailed out and to reform the economy. The bankruptcies and falldowns in turns affect countries whose economic players had invested directly or indirectly in the security or its derivatives. Macroeconomic condition of these countries including Indonesia then started to fluctuate as seen from volatilities in a number of variables including stock and commodity prices, exchange rates, external trade volumes, and even the unemployment rates. The transmission channel of the crisis into the countries may differ for each country depending on how the country had linked directly or indirectly with the crisis epicentrum. Assessing the crisis transmissions is important for understandingand hence anticipatinghow a crisis gets transmitted from a similar source country to the Indonesian economy. Such an understanding would help in formulating required policy responses. According to Murniningtyas (2009), the GFC impacted the Indonesian economy through three transmission channels, namely (a) through the stock market and this is the fastest one, (b) through the capital market including the banking sector, and (c) through the real sector. The first and second channels in this division are however closely interlinked and somehow overlapping. An alternative division, following Siregar and Masyitho (2008), is through investment channel and export channel. The former would be able to capture impacts the GFC brought about into the economy through portfolio investment and foreign direct investment (FDI), the latter through international trade. Through both channels, GDP and general prices are assumed to be impacted. Assessing these two transmission econometrically is an objective of this paper. But before that, another objective is to describe dynamics of a set of important Indonesian macroeconomic variables pre and post the GFC. A set of policy responses adopted by the authorities will also be described, impacts of which would be reflected from macroeconomic performance in the more recent time.

2. Dynamics of Some Macroeconomic Variables of Indonesia Pre and Post the GFC
2.1. Portfolio Investment and FDI As can be seen from Figure 1, during 2006 and 2007 Jakarta Composite Index (JCI) had tended to increase over time. After February 2008 JCI had started to decline until February 2009. The lowest index had occurred during October 2008-February 2009, which are very close to the worst period of the GFC. In only two month, the index went down sharply from 2166 (August 2008) to 1257 (October 439

European Journal of Social Sciences Volume 30, Number 3 (2012) 20008). Despite this sharp decline, the negative impact of the GFC on the Indonesian stock market had occurred for around one year only, the worst of which happened for around four continuous months. After February 2009, the general tendency of JCI has been to increase continuously passing the psychological figure of 4000 in July 2011.
Figure 1: Jakarta Composite Index, January 2006 August 2011

Source: Bank Indonesia (2011, processed).

Actually the Indonesian stock market should not be affected significantly by the GFC because the financial instrument responsible for triggering the GFC was not a dominant component in the Indonesian financial market. The slow down was probably due to indirect effects of the crisis or to negative expectation of the players causing investors to panic. As for the FDI, the GFC had caused this variable to decrease quite sharply from around USD 3.4 trillion in 2008Q3 to only USD 540 million in 2009Q4 (Figure 2). The downturn of the FDI due to the crisis thus occurred for around 15 months, a little bit longer than that of the JCIs. But like what happened with the JCI, the recent development has shown the FDI to increase significantly reaching more than USD 5.2 trillion. On average, the Indonesias FDI comes mainly from Asia, in which Singapore possesses the biggest share (25 percent) followed by European countries (24 percent). The US has the share of only around 9 percent, in the fourth rank after Japan (19 percent). According to UNCTAD (2009), decreases in the global FDI during 2008-2009 have been due to two factors. First, firms capability to invest had declined because of decreases in access to financial resources, decreases in corporate profits, and higher costs of finance. Second, propensity to invest had related negatively to economic prospect particularly of developed countries.
Figure 2: Foreign Direct Investment to Indonesia, 2004Q1 2011Q2

Source: Bank Indonesia (2011, processed).

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European Journal of Social Sciences Volume 30, Number 3 (2012) 2.2. Export and Import The GFC had also impacted the Indonesias international trade. The impact was relatively quick experienced by the economy, i.e. in November 2008 export value was dropped by around 15 percent and import value by about 22 percent as compared to the previous month (Figure 3). The trough for export was reached in January 2009 and for import in February 2009. After these months, both export and import have tended to increase, with the net export being considerably higher than the level during 2008.
Figure 3: Export and Import of Indonesia, January 2002-August 2011

Source: Bank Indonesia (2011, processed).

Using a simultaneous macroeconomic model, Prasmuko and Anugrah (2010) found that the GFC impact on the Indonesian economy occurred through the international trade channel which in turns had reduced the national output. The exchange rate, being directly affected by the GFC, was found by their study to affect both export and import but did not affect investment. It is perhaps more stable exchange rate, not a depreciated one, which has influence the export and import to depict strong positive trend post the GFC. 2.3. Inflation and Exchange Rates Figure 4 shows that there were two time periods whereby inflation rate of Indonesia spiked to two digits. The first period was October 2005 September 2006, whereby inflation rate spanned between 14.6 percent and 18.4 percent. This was due to two time lift ups of oil subsidy during 2005. The second one was within the GFC period of May December 2008, whereby the inflation rate ranged between 10.4 percent and 12.1 percent. Despite the slow downs of global aggregate demand during the crisis period, it was a puzzle that the Indonesias inflation rate had increased. This was probably because of upward pressures on expected inflation due to uncertainties in commodity prices. Another explanation of the increased inflation rate perhaps was depreciation of the IDR exchange rate.

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Figure 4: Inflation Rate of Indonesia, January 2003-October 2011

Source: Bank Indonesia (2011, processed)

Dynamics of the IDR exchange rate are presented in Figure 5. Comparing Figures 4 and 5, it can be seen that the increases in inflation rate during the GFC era to some extent associate with significant depreciation of the IDR exchange rate in approximately the same time period. This suggests that the increases in inflation rate may be due to weakening of the IDR exchange rate. The depreciation might occur due also to uncertainties which in turn led economic players particularly speculators to keep buying foreign currencies in the money market.
Figure 5: Exchange Rate of IDR to USD, January 2002-June 2011

Source: Bank Indonesia (2011)

2.4. GDP, Economic Growth, and Percapita GDP Due to negatives effects of the GFC on Indonesias investment and export, economic growth of the country had started to slowdown since 2008Q4, and this slowdown occurred for around a year (Figure 6). The lowest growth was 4.2 percent (way below the countrys long run or historical average of above 6 percent) which happened in 2009Q2. Depicting the increased trends of investment and trade, after 2009Q2 economic growth has moved faster, reaching around 6.9 percent in the final quarter of 2010 and stabilizing at around 6.5 442

European Journal of Social Sciences Volume 30, Number 3 (2012) percent during the first two quarters of 2011. Following the trend of economic growth, it is also apparent from Figure 4 that the GDP has in general tended to increase in recent times. Despite volatility of the economic growth, the percapita GDP has continuously increased since the year 2000 (Figure 7). Its value increased from USD 773 in 2000 to USD 1144 in 2010 (constant 2010 USD) or a real increase of around 48 percent. Nominal figure of the 2010 percapita GDP was above USD 3000 or almost four folds nominally as compared to the 2000 figure.
Figure 6: Quarterly GDP and Economic Growth of Indonesia, 2002-2011

Source: Bank Indonesia (2011, processed).

Thus, in terms of percapita GDP, the GFC seemed to have no impact. Perhaps this was due to: first, smaller figure of the population growthi.e. 1.49 percent p.a. during the decadethan the average growth of the economy, and hence more economic pie was made available for the population which only increased by a smaller number. Second, the GFC impact on the economic growth only occurred shortly, and hence the even faster growth post crisis quickly offset the impact rendering the real GDP and percapita GDP to increase.
Figure 7: Percapita GDP and Economic Growth of Indonesia, 2000-2010

Source: World Bank (2011, processed).

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European Journal of Social Sciences Volume 30, Number 3 (2012) 2.5. Agriculture The exposition above suggests that the GFC has affected the economys demand side, and the effect occurred only in the short run. But what has happened on the supply side? Observing performance of the paddy sector, none of the sectors area, yield (productivity), or production was affected by the GFC (Figure 8). This is due to no significant linkages occur between paddy sector and sectors affected directly by the crisis. Most of its inputs as well as output markets are of locally. In addition, the huge domestic market, i.e. around 240 million consumers by itself supports its strength facing the exogenous shock.
Figure 8: Harvest Area, Production, and Yield of Paddy in Indonesia, 2002-2011

Source: Indonesia Stastical Agency (2011, processed).

As for the performance of the palm oil sector, as can be seen from Table 1, the GFC also has no correlation with this sector. From 2008 onwards, areal, production, or yield of palm oil has in fact continued to increase. During the period 2002-2010, production has increased by more than double from 9.6 million tons to 19.8 million tons. Volatilities can only be observed in terms of the palm oil yield; however this has nothing to do with the crisis but to increases in new planted areas causing production per hectarei.e. the yieldto fluctuate accordingly. A few studies attempted to assess effects of the GFC on the Indonesian agriculture. Firdaus (2010) for instance found that the crisis significantly depressed the commodity price. The volume of some main agricultural exports increased from 2008 to 2009; however, a large drop in commodity price reduced the export value. His panel data analysis furthermore found that the main determinant of Indonesian exports of CPO, rubber and coffee was export prices. This was in line with Siregar and Masyitho (2008) who stated that the GFC would impact the agricultural economy through commodity price uncertainties which then transmitted to domestic expected inflation and to other variables. Particularly for agribusiness sector, commodity price uncertainties would adversely affect financial performance of farms and agribusinesses. But soon after the commodity price stabilizes, the effect would disappear.
Table 1: Land Area and Production of Palm Oil in Indonesia, 2002-2010
Year 2002 2003 2004 2005 2006 2007 2008 Areal (Ha) 5,067,058 5,283,557 5,284,723 5,453,817 6,594,914 6,766,836 7,363,847 Production (Ton) 9,622,344 10,440,834 10,830,389 11,861,615 17,350,848 17,664,725 17,539,788 Yield (Ton/Ha) 2.909 3.045 2.833 2.925 3.498 2.994 3.424

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Table 1: Land Area and Production of Palm Oil in Indonesia, 2002-2010 - continued
19,324,293 19,760,011 3.487 3.552

2009 8,248,328 2010 8,430,026 Source: Agriculture database, Ministry of Agiculture.

2.6. Unemployment and Poverty It is apparent from Figure 9 that after the onset of GFC, the open unemployment rate of Indonesia has actually continued to decrease. It was 8.46 percent in February 2008 and down to 6.80 percent in February 2011 and further to 6.56 percent, which was equivalent to 7.7 million people, in August 2011. This is in accordance to movements of the real GDP and percapita GDP, i.e. higher real GDP and percapita GDP associate with lower unemployment rate.
Figure 9: Open Unemployment Rate of Indonesia, 2005-2011

Source: Indonesian Statistical Agency (2011, processed)

In line with the unemployment dynamics, the GFC also could not affect the poverty rate. As shown in Figure 10, the poverty rate was around 16.6 percent in 2007, down to around 15.4 percent in 2008, and continued to decline to around 14.2 percent in 2009, and finally around 12.5 percentwhich was equivalent to 30.0 million peoplein March 2011. The crisis also leaved the composition of poverty unchanged, i.e. poverty incident is more in rural than in urban areas. Therefore, it is clear that the economys supply side was not significantly affected by the GFC. The fact that the GFC did affect the economys demand side, but not the supply side, might reflect effectiveness of a number of policy responses implemented by the authorities during and post the crisis.
Figure 10: Poverty Rate of Indonesia, 2007-2011

Source: Indonesian Statistical Agency (2011, Processed).

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3. Transmission Channels of the GFC into Indonesian Economy: A VECM Analysis

There are two channels of GFC transmission into the Indonesian economy used in this analysis, namely export channel and investment channel. The export channel utilizes variables as follow: real GDP of Indonesia (GDPINA), the inflation rate (INF), Indonesias total export value (XTOT), value of Indonesias export to Europe (XINAEUR), the real exchange rate of IDR to USD (RER), and value of Indonesias export to the US (XINAUS). A vector error correction model (VECM) is constructed with the variables order as presented above. The timeseries data used are of monthly covering the period January 2004 to June 2011. The investment channel is also modeled as a VECM with variables order as follow: real GDP of Indonesia (GDPINA), the inflation rate (INF), Jakarta Stock Index (IHSG), the US Stock Index (NYSE), the Germany Stock Index (DAX), value of foreign direct investment to Indonesia (FDI), and the real interest rate of investment credit (RINVR). The real interest rate is estimated as the difference between the corresponding nominal interest rate and expected inflation rate. The latter is proxied as the one period lag of inflation rate, as asserted using the adaptive inflation theory. The timeseries data used are of monthly spanning from March 2004 to June 2011. Before estimating and analyzing the VECMs models, the Pearson correlation coefficients are calculated for the variables, and the result is as presented in Table 2. In the export channel, the Indonesias total export and the export to Europe have positive correlation with the Indonesian GDP. The export to the US however correlates negatively with the GDP. The inflation rate correlates negatively with the GDP as expected. The real exchange rate correlate positively with the GDP, meaning real depreciation would lead to increases in the countrys exports and hence in the GDP. All correlation coefficients have considerably high values except for the rate of inflation, but the magnitude of such correlation coefficient is small. In the investment channel, the stock price indices of Indonesia and Germany correlate positively with the GDP, however that of the US has negative correlation with the GDP but its value is trivial. Positive correlation also occurs between the FDI and the GDP as expected. The real interest rate correlates positively with the GDP suggesting that investors would invest more in Indonesia when there is higher return on investment. And like in the first channel, the inflation rate has negative correlation with the GDP but the magnitude of such correlation is small. With regard to the using of VECMs, all variables in level contain unit roots but all variable in first difference are stationary. Furthermore there are cointegrations among the variables (for the sake of briefness we do not report outputs of the unit root and cointegration tests). All the routine tests were carried out accordingly, but given limited space we only report the impulse response functions (IRF) and forecast error variance decomposition (FEVD) analyses.
Table 2: Pearson Correlation Coefficients of the Variables Used in the Export and Investment Channels
Variables INF XTOT XINAEUR RER XINAUS INF IHSG FDI NYSE DAX RINVR Correlation Coefficient -0.30 0.94 0.88 0.86 -0.87 -0.35 0.90 0.64 -0.02 0.54 0.14

Model Export Channel

GDPINA with

Investment Channel

GDPINA with

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European Journal of Social Sciences Volume 30, Number 3 (2012) The IRFs in the left panel of Figure 11 depict responses of the real GDP of Indonesia to shocks to each of the variables. Let us first take a look at the export channel. It is quite clear from the figure that the GDP is mainly responded to its own shock, which might be interpreted as shocks to the domestic absorptionbecause private consumption, domestic investment, and government expenditure all together constitute much dominant figure as compared to the external trade or investment. A shock to total export value could drive the GDP positively only in the short run, but its effect is much smaller than that of the domestic absorption shocks. Shocks to exports to the US and Europe may drive down the GDP in the short run with more or less the same magnitude (in absolute value) as that of the total export. With regard to the investment channel, the IRFs are quite similar with the former channel in which the GDP responses to own shocks (domestic absorption shocks) are the highest. In the short run, the GDP responses to FDI shocks are relatively small and practically zero in the longer run. The second importance shock next to the technological shock is the NYSE shock. As shown in the right panel of Figure 11, shocks to NYSE may drive down the GDP particularly in the short run but with much less magnitude as compared to domestic absorption shocks. Comparing the two channels, it is clear that shocks to GDP play the most important role in determining the GDP dynamics regardless the channels used in the analysis. All the other shocks may only play relatively small role. But amongst these less importance shocks, NYSE shocks may play some role especially in the short run. This assertion is supported by the FEVD analysis as presented in Figure 12. As can be seen from the right panel of this figure, shocks to NYSE could explain the Indonesian GDP variability upto around 10 percent.
Figure 11: Responses of the GDP to 1 S.E. Shock to Each Variable of the VECM Model

Response to Cholesky One S.D. Innovations

Response of GDPINA to GDPINA
.012 .012
.008

Response to Cholesky One S.D. Innovations

Response of GDPINA to GDPINA Response of GDPINA to INF
.012

Response of GDPINA to INF

.012

.008

.008

.008

.004

.004

.004

.004

.000

.000

-.004

-.004 10 20 30 40 50 60 10 20 30 40 50 60

.000

.000

Response of GDPINA to IHSG

Response of GDPINA to INVR

.012

-.004 10 20 30 40 50 60

-.004 10 20 30 40 50 60

.012

.008

.008

Response of GDPINA to XTOT

.012 .012

Response of GDPINA to XINAEUR

.004

.004

.000

.000

.008

.008
-.004 10 20 30 40 50 60 -.004 10 20 30 40 50 60

.004

.004
.012

Response of GDPINA to FDI

.012

Response of GDPINA to DAX

.000

.000
.008 .008

-.004 10 20 30 40 50 60

-.004 10 20 30 40 50 60

.004

.004

.000

.000

Response of GDPINA to RER

.012 .012

Response of GDPINA to XINAUS

-.004 10 20 30 40 50 60 -.004 10 20 30 40 50 60

Response of GDPINA to NYSE

.008

.008

.012

.004

.004

.008

.004

.000

.000
.000

-.004 10 20 30 40 50 60

-.004 10 20 30 40 50 60

-.004 10 20 30 40 50 60

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European Journal of Social Sciences Volume 30, Number 3 (2012) To conclude this section, both the export and investment channels may approximately equally be used to analyze effects of the GFC or similar kind of shocks on the Indonesian economy. In both channels domestic absorption shocks play the dominant role. Shocks to foreign stock market especially in the US, which could represent the GFC, however small might affect the Indonesian economy as represented by its real GDP.
Figure 12: Forecast Error Variance Decomposition Analyses on the Real GDP

4. Policy Responses by the Indonesian Authorities

The GFC had forced the authorities to formulate and implement a number of policies. Since each crisis is unique, the set of policies taken facing this GFC were different from that facing the Asian Financial Crisis a decade before. In this paper we record only four policy kinds, namely monetary and banking policy, fiscal policy, trade policy, and agricultural policy which were formulated or implemented by the authorities during 2008 to 2010. 4.1. Monetary and Banking Policy The policy responses related to monetary and banking sector amongst others are as follow. a) Increasing Bank Indonesia (Central Bank) interest rate or BI rate in order to tackle risks of high inflation rate due to commodity price fluctuations. b) Reducing excess pressure on interbank money market, in 2008Q2 BI narrowed down by three times the interest rate corridor (standing facility) so as to become BI Rate +/- 50bps. c) Relaxing the minimum obligatory reserves of the banks so as to become a form of statutory reserves, 5% of the third party fund by October 2008. d) Minimizing the volatility of IDR exchange rates, BI had prudentially implemented a stabilization policy by carefully managing the demand and supply of foreign currencies. e) On the banking side, BI adjusted the regulation on short term financing facility in order to broaden access of banks to the facility. f) Increasing the amount of deposit guaranteed in each bank from IDR 1 billion to IDR 2 billion. g) During 2009, BI implemented loose monetary policy as reflected by decreases in the BI rate accompanied by a moderate macro-prudential policy in order to support economic recovery while keeping the inflation rate under control. h) During 2010, liquidity control policy was implemented by supporting changes in banks liquidity management so as to make them considering longer term perspective by decreasing availability of the BI certificates (SBI) in the money market as well as by issuing SBI with longer maturities. 448

European Journal of Social Sciences Volume 30, Number 3 (2012) 4.2. Fiscal Policy The main goal of fiscal policy responses during 2008-2010 was to cushion the GFC effects on unskilled workers and people below the poverty line. Amongt others they are as follow. a) Accelerating the absorption of government budget by revising the regulation on goods and services procurement for government institutions. b) Providing incentives and disincentives for the real sector by easing business permits and simplifying tax payments. c) Attracting overseas investors by simplifying related regulations. d) Continuing implementation of programs for reducing unemployment and poverty which among others include direct cash transfers (BLT), rice for the poors (Raskin), school operational assistance (BOS), national program of independent society empowerment (PNPM), micro credit for the small businesses (KUR). e) In 2009 the government implemented countercyclical policy in form of fiscal stimuli for firms in order to avoid deceleration of the economic growth. Among the stimuli are reductions in tax rates of personal income, increases in the income limits that are subject to taxes, abolishing import tariffs for some products, subsidies for value added taxes on some commodities including cooking oil and biofuels, and fiscal stimulus for infrastructure and labor intensive developments. 4.3. Trade Policy Trade policy aims at increasing exports of high value added products, diversifying export markets, and protecting domestic producers in healthy ways. Among the policies implemented during the crisis era are as follow. a) Anticipating protectionism policies by other countries which possibly accuse that the government has practiced dumping by making the necessary preparations. b) Protecting domestic market from illegal imports as well as from the legal ones but suspectedly subject to dumping. c) Diversifying export markets particularly to Asian countries which were insignificantly affected by the crisis including China, Taiwan, Korea, India, and Pakistan. 4.4. Agricultural Policy The main objectives of agricultural policy are to maintain the food security level as well as to protect the welfare of farmers and rural population from income deteriorations. The policies among others are as follow. a) Increasing yield and production of food crops b) Improving agricultural institutional aspects that particularly relate to financing and R&D c) Providing safety nets for the farmers and rural population so as to avoid food insecurity d) Making clearer and more local friendly regulations on modern retail chain e) Strengthening government and community food stocks f) Improving management of staple food distribution so as to become more efficient g) Stabilizing food prices h) Implementing food diversification strategy.

5. Conclusion and Implication

The GFC has affected the Indonesian economy particularly in the demand side but lasted for short term only. Magnitude of the effect was considered relatively small. Although causing only relatively small effects on the Indonesian economy, the GFC as represented by shocks to the US stock market could result in volatilities in the economy. Relatively strong domestic absorption and comprehensive policy 449

European Journal of Social Sciences Volume 30, Number 3 (2012) responses implemented by both monetary authority and the government have been able to dampen the volatilities and shorten the duration of adverse effects brought about by the GFC. As the result, the Indonesian economy post the GFC has been progressing well and sufficiently prospective. There still open possibility that crises might come again in the future. To anticipate more crises in the future, purchasing power of the households need be improved continuously, and this should be balanced by increasing productive capacity of the economy. Among the important sectors for this are agriculture and agro-based industries which should be developed more seriously. Finally, crisis management protocols should be improved further and standardized. For the CMP to work well, horizontal as well as vertical coordination of the institutions have to be improved significantly.

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