click here to read the full article: ACFTA – Which Options For Indonesia

By: Martin Manurung*
Facing the ASEAN-China Free Trade Agreement (ACFTA), workers and employers stand on the same position. This is an unusual phenomenon.

Both are screaming for help facing tremendous consequences of the implementation of the free trade agreement. Indeed, the FTA’s impacts are tough, both for the industry and workers. Therefore, it is legitimate to ask: who did we think will benefit from the decision to join the ACFTA?

Particularly on the Indonesian case, we know have found out that the participation in the ACFTA was decided without comprehensive qualitative and quantitative research with regards to the benefits and losses of such agreement. Furthermore, the government has done very little preparations to strengthen the economic structure and the country’s competitiveness in anticipating the FTA.

The Indonesian economy has shown negative responses to the implementation of ACFTA and the previous AFTA. It is obvious that China will be more dominant than the ASEAN countries in the ACFTA. One of the most crucial implications of such agreement is the increase of unemployment rate as a result of the closures of the manufactures and other productive sectors.

At least, 10 sectors of Indonesia’s manufacture will have a hard time when the ACFTA is implemented in full effect. The sectors are textiles and textiles products (TPT), food and beverages industry, petrochemical industry, agricultural equipment and machinery industry, footwear industry, synthetic fiber industry, electronics (including cable and electrical equipments), machinery industry, constructions, and steel industry. The unemployment rate caused by industrial closures is expected to reach 7.5 million, and it will subsequently lead to the increase of poverty rates.

Furthermore, the ASEAN countries also are less competitive with regards to capital financing. In Indonesia, for example, interest rates reach 14 to 16 percent, while China’s are only 4 to 6 percent. It will make Indonesia’s industrial climate tougher when implementing free trade amid the high interest rates, which signal inefficiency in the country’s financial sector.

If we need to implement the ACFTA, we have to take systematic and quick actions. Among others are targeted industrial strategy, which includes labor intensive sectors such as agricultures and fisheries. The development of labor intensive sectors will have higher multiplier effect for the people’s welfare.

In the monetary and banking sector, it is now the time for the state (not only the government) to create a mechanism for banks to disburse funds to support industrialization. If needed, we have to design an “Agricultural Bank” to support the plan, as happened in China and Thailand.

In the financial sector, we must stop, or reduce, the recent trend that banks merely take profits from the financial markets and not acting as intermediary institution to the real sector. This must be followed by policy schemes and incentives to make funds in the financial sector can help industrial strategy in the real sector.

Based on the above perspective, we have to realize that a lot of preparations must be undertaken prior to full implementation of the ACFTA. Therefore, what we need is not merely to postpone the FTA, but also to significantly improve our economic system, financial system and social security system.

*The writer is Director of the Institute for Welfare Democracy

Originally published here

Roots and Spread of Financial Crisis

After the sub-prime mortgage crisis in the US first burst into the headlines of mainstream newspapers in June 2007[1], there have been two general categories of the many discussions that have taken place regarding the roots of the global financial – and now, economic – crisis, both of which views are important but do not usually get discussed together. It is crucial to see the importance of their interaction – the dynamics of one on the other – rather than either in isolation.

One view can be labeled the ‘temporary excess’ point of view which, to put it plainly, argues that greed leading to excessive risk-taking, lax regulations, excessive overzealous brokerage and rating agencies caused the crisis we have on our hands today. To resolve the crisis, therefore, efforts should be made to fix, ‘tweak’, and improve upon the technical aberrations of what is – to those who subscribe to this view – an otherwise perfect financial system. This view is not completely incorrect, though it is incomplete.

The other view, the ‘aggregate demand generation’ point of view believes there is as a root cause – a  systemic, structural flaw in the whole system of capitalist-driven finance that led to the global financial crisis. We believe that flaw lies in the problem of income inequality. As we shall see below, tackling the root, structural cause is of utmost importance if we are to prevent – or at least mitigate – future financial crises of the nature we are going through today. As Thomas I. Palley, the then-assistant director of public policy of AFL-CIO, put it when talking about yet another financial crisis that occurred in the US eight years ago:

To read more, click here.

In 2006–08, food shortages became a global reality, with the prices of commodities spiraling beyond the reach of vast numbers of people. International agencies were caught flatfooted, with the World Food Program warning that its rapidly diminishing food stocks might not be able to deal with the emergency.

Owing to surging prices of rice, wheat, and vegetable oils, the food import bills of the Least Developed Countries (LDCs) climbed by 37 percent from 2007 to 2008, from $17.9 million to $24.6 million, after having risen by 30 percent in 2006. By the end of 2008, the United Nations reported, “the annual food import basket in LDCs cost more than three times that of 2000, not because of the increased volume of food imports, but as the result of rising food prices.”1 These tumultuous developments added 75 million people to the ranks of the hungry and drove an estimated 125 million people in developing countries into extreme poverty.2

Alarmed by massive global demand, countries like China and Argentina resorted to imposing taxes or quotas on their rice and wheat exports to avert local shortages. Rice exports were simply banned in Cambodia, Egypt, India, Indonesia, and Viet Nam. South-South solidarity, fragile in the best of times, crumbled, becoming part of the collateral damage of the crisis.

To read more, click here.

In 2007, the SBY-JK administration proclaimed its “1,000 Towers” plan, the provision of one million high-rise apartments, mostly in Jakarta and other large cities in Java, to address a growing housing crisis. According to official estimates, the demand for housing in Indonesia has reached at least 5.5 million units and will increase annually by approximately one million units. The towers were originally scheduled for completion this year, but by the end of 2008 only 86 towers had been built.

The official estimates of housing needs do not fully reflect the realities of the housing situation. Missing are the millions of families who are registered as owning a residence that does not meet eligibility standards. Many of these housing situations are a result of natural disasters.

In general, the housing crisis is marked by slum housing, including sheds and illegal shelters in river floodplains and under bridges, that has expanded and reached into most corners of large cities. The housing crisis is also marked by social-space inequalities resulting in the number of houses occupied exceeding the capacity, a very high housing density in certain regions, the unavailability of space for privacy, the loss of public space and recreation and housing locations that are at some distance from the workplace.

To read more, click here.

Globally, every seven seconds a child under ten years old dies from hunger. Meanwhile, according to research released by the UN in 2008, some 826 million people around the world are permanently suffering severe malnutrition.

In Indonesia, news of malnutrition and deaths caused by starvation in several areas throughout the country has not only questioned our humanity, but has also shocked many of us because the cases have often occurred in rice or other staple food producing areas, or in big cities.

The agricultural sector, as one labor-intensive sector, has become victim to tariff policies such as the cutting of subsidies and imports of agricultural products. Such policies have impacted farmers and aggravated the development in that particular sector.

The growth sources focused solely on the consumptive and capital-intensive sectors. It is no surprise that there were times that every one percent growth was used to create between 300,000 and 400,000 job opportunities, and now can only create around 178,000 jobs. We are seeing more and more people falling into poverty.

To read more, click here.

Four principles guide the social democratic response:

• Solutions must be consistent with basic values of social justice and social solidarity as well as basic notions of fairness
• The bonds of social solidarity cross national boundaries; we cannot take actions to help ourselves at the expense of those in the developing world
• Solutions must reflect an understanding of the necessary balance between government and markets
• Respect for the basic principles of democratic due process, including full transparency.

There is by now a consensus that the current global financial crisis may well be the worst since the Great Depression. As solutions are proposed, there is strong pressure from Wall Street to make sure that their way of doing business is protected.  They don’t want to see finance suffer from too much regulation.

In times of crisis, we all have to pull together; sacrifices are asked of us all. But in a democracy, that does not mean silent ascension to whatever is proposed. The voices of Social Democrats and those who reject the free market mantra of the US, should be listened to as the debate about how to proceed moves forward. We must be allowed to help formulate the government responses to the crisis. There are stark differences of opinion as to the best way to proceed.

To read more, click here.

by Martin Manurung

One month prior to the legislative election in Indonesia, the world is officially declared to be in an economic recession. Global economic growth for 2009 which was predicted to be only 0.5 percent, in just 2 months was corrected by the Intenational Monetary Fund (IMF) and the World Bank to become zero percent. It is the worst growth since the World War II. It also potentially leads to a number of impacts; from unemployment, rampant proverty, famine, riots, until wars. Thus, the IMF was right when it concluded that the current recession is a problem of mankind and their future.

Read more about the situation in Indonesia, the economic depression and change.

The following institutions are behind this new website: Bretton Woods Project, Casino Crash, Debtonation, Eurodad, Focus on the Global South, Choike.org

The website intends to:

“forward alternative ideas and analyses, provides information about and comments on latest events, and gives an overview of civil society and other peoples’ activities. Rethinking finance is a website of several international civil society organisations and individuals that contribute to its content, keeping it a place of lively debate and up to date information.”