QA Sessions ________________________________________________________
1. Q: Citigroup, Hong Kong
There is a trend t o continue t he gradually reduce int erest rate. What are the fact ors that support this policy and what the risks of this scenario for
2006.
A: Hartadi A. Sarwono
Bank Indonesia will reduce t he int erest rat e gradually as l ong as t he pressure on t he i nf lat ion can be reduced.
Some f act ors t hat support t he pol icy t o reduce t he int erest rat e are: a.
Development of inf lat ion i n semest er I 2006, showed t hat t he pressure of inf lat ion is limit ed. Bank Indonesia’ s proj ect ion on inf lat ion by t he end of
t he year 2006 will be slight ly below t he l ower t arget of 7. Alt hough t here are some risk f act ors especially on t he global t ight ening monet ary policy,
we hopef ul ly t hat t he risks will be reduced a lit t le bit af t er t he FOMC meet ing on August 8, 2006.
b. We believe t he dif f erence bet ween domest ic and int ernat ional int erest rat e
st ill provide some incent ives f or invest ors t o place t heir f und in Indonesia. We bel ieve t hese act ions wil l not bring signif icant capit al reversal f rom
Indonesia.
c. We also see t hat as l ong as t he oil price is below USD 70, - per barrel, it is
st ill have a posit ive impact on f iscal and also on balance of payment . Based on our calculat ion, USD 1, - increase in oil price will give posit ive surpl us of
oil and gas around USD 300 mil lion. We also see a posit ive impact on t he budget t hat USD 1, - increase in oil price will give surpl us budget about Rp.
0. 4 t rillion. Basically, t he pressure f rom t he global t ight ening and high oil price has been limit ed and t here is no pressure on inf lat ion. Based on t hat
consi derat ion, Board has decided t o l ower t he int erest rat e 50 bps. We believe t hat conf idence is increased and economic act ivit y will move
f orward which will enable us t o achieve more GDP growt h t his year.
2. Q: Morgan Stanley
Would you please explain what you have done to reduce the possibility of investor take their money out and to increase investment activit y in
Indonesia?
A: Muhamad Ikhsan
So f ar, what we have done is t o ensure all t he packages will be implement ed on t ime so as t o improve our credibilit y.
We realized t hat several programs have not been achieved on t ime as scheduled. Nonet heless, we also have done some short cut , f or example we
cooperat ed wit h Government of Singapore t o t ry t o develop special economic zone in Bat am and Karimun. We chose t hat Area because t here are no problems
on inf rast ruct ure t here. Just by simplif ying t he administ rat ion problems, we hope it coul d produce quick result s in t he invest ment .
In relat ion t o t hat , Minist ry of Finance has also launched int ernal ref orm in t he Direct orat e General DG of Taxat ion and DG of Cust oms. So f ar, t he progress
based on our discussion wit h business sect or is quit e sat isf act ory, but we hope t hat in t he second semest er of 2006 we will have more progress in t he
implement at ion of our package.
3. Q: Bearn St erns, Singapore
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