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E D I S I 0 2 T A H U N X V I I 2 0 1 1 recovery at the 3
rd
quarter of 2009 when the fiscal stimulus had not been fully implemented, we can speculate that the economy
started its recovery without much help from the fiscal stimulus. Worse, most of the stimulus poured into the economy at the 4
th
quarter of 2009 could give unnecessary additional demand to the economy which had started improving.
4.2. Target
To be effective, fiscal stimulus has to be well targeted. Global financial crisis affect each economic sectors and population
groups differently. Some sectors or groups are more vulnerable than the others. This paper argues that fiscal stimulus should be
directly target and help the most vulnerable sectors or groups to cope with the global financial crisis.
Population Groups During the global financial crisis, the most vulnerable population
groups were the households with low income. Moreover, households with low income have higher marginal propensity to
consume MPC than households with higher income. When government helps these households, for example by giving them
additional revenue, bigger shares of the additional revenue will go to consumption. As a result, the multiplier effect will be bigger.
Therefore, fiscal stimulus ideally should target these groups.
Looking at Indonesia fiscal stimulus package, the biggest allocation to help household in dealing with the crisis, came in form of the
personal income tax cut. Government of Indonesia reduced its personal income tax rate to 30 per cent from its previous level, 35 per
cent, with high hope that the household would turn the additional revenue into consumption. However it was not happened.
National Development Planning AgencyBappenas 2010 did survey to see people’s responses to the personal income tax cut
policy. The result figure 4.3 shows that most of them save the additional revenue 57.69 per cent, 11.54 per cent use
the additional revenue as investment, 11.54 per cent pay their debt, and 3.85 per cent do nothing. Only 15.38 per cent of the
respondents increase their consumption.
Figure 4.3: People Response to Personal Income Tax Cut
Investment Saving
Pay Bebt Consumption
Do Nothing 3,85
57,69 11,54
11,54 15,38
Source: National Development Planning AgencyBappenas, 2010
People who eligible for tax in Indonesia are the people who has income more than IDR 15.4 million a year or in average IDR
1.3 million per month. That level of income is higher than the poverty line in Indonesia and in most of areas, the household
with that level of income could be categorizedin middle income level. Furthermore, most of the people who pay tax work in
formal sector since it is hard for tax authorities to identify and collect tax from informal sectors. Normally, formal worker has a
better income, working stability and condition, compare to the informal sectors. In addition, individu need to have tax payer
identity number, for the tax authorities to be able to tax. Most of the households with low income do not have that luxury.
Looking at the characteristics of the people who pay personal income tax, it can be concluded that the tax cut did not
target the right population groups. The policyis enjoyedby households with middle income or higher income, not the
ideal groups mentioned before. That is the reason why most of the responses showed in Bappenas survey are saving, not
consumption. Higher income households have smaller MPC. They tend to save, not consume their additional income.
Economic Sectors Figure 4.4 shows the scatter plot of Indonesia Industry Sectors
3 Digit ISIC based on percentage of exported output and imported output. The higher percentage of exported output
means most of the output of industry are exported. Meanwhile the higher percentage of imported input means most of the
input used in the industry supplied by other countries.
The first quadrant shows the sectors of industry with more than 50 of their output are exported and more than 50
of their input come from imported good. The sectors in this quadrant really depend on the condition of the international
market. Sectors classified in this quadrant for example are communication equipments, photographic equipments, and
electronic components. The second quadrant shows sectors which sell most of its output to the domestic market, but used imported
goods more than the domestic goods as their input, i,e: office equipment and motor vehicle. Meanwhile, the third quadrant
shows sectors which rely on domestic market for its ouput market and input goods, i.e: beverages and industrial chemicals. Last,
sectors which export most of its output and used mostly domestic goods as their input, included in the fourth quadrant, i.e: leather
and good leather; iron and steel. The completed list of 66 sectors in the four quadrant can be seen in annex 1.
Figure 4.4: Scatter Plot of Industry Based on Exported Output and Imported Input
Quadrat II Quadrat I
Quadrat IV Quadrat III
Exported Output
Imported Input 0,00
0,00 20,00
40,00 60,00
80,00 100,00
10,00 20,00
30,00 40,00
50,00 60,00
70,00 80,00
90,00 100,00
Source: Industrial Statistics, Bureau of Central Statisitcs, 2007, Modified
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E D I S I 0 2 T A H U N X V I I 2 0 1 1 One of the biggest effects of the global financial crisis was
on the performance of the international trade. The falling of world economic growth shrunk the export market for almost
every countries. At the same time, the price of imported goods increased. Export and import around the world were drop. As
consequences, sectors in the first quadrant: Communication equipments, photographic equipments, electronic components,
footwear, other processing, clocks and other similiar products, electrical motor, other machineries, are the most vulnerable
sectors among all four quadrants.
Import duties subsidy in form of government paid import duties policy – BM-DTP was one of the policies used by the
government to help the industry to cope with the negative impact of the crisis. Stated in the fiscal stimulus documents,
sectors received the subsidy are heavy equipment, components for small size steam power plant, skim milk and full cream,
components of motor vehicle, electronic components, components of ships construction, and aeroplane. Based on
the scatter plot, the ideal sectors to receive tariff duties subsidy should be sectors with high percentage of imported goods,
sectors in the first and second quadrant. However among sectors given the subsidy, components of motor vehicle,
components of ships construction, and aeroplane are not fit into that category.
Moreover, others policy used by the government were not directly targeted to help the vulnerable sectors or help industry
to cope with the crisis. Some of the policy goals were for other purpose not directly related to the global financial crisis. For
example: VAT subsidy for oil and gas exploration. The goal for this policy was to improve the production of oil and gas in the
future. That goal has nothing to do with helping the industry coping with the global financial crisis.
Unemployment
One of government fiscal stimulus goals was helping the unemployment due to layoffs during the global financial
crisis. The main instrument used by the government was the infrastructure projects. Most of the projects were in
construction sectors, such as building road, bridge, or traditional market. However, data shows the layoffs occured during the
global financial crisis were not in construction sectors. Most of the layoffs are in textile, garment, beverage, furniture,
manufacture, plastics, transport, wood, and mining. There was a missmatch between unemployment due to layoffs during the
global financial crisis with the employment opportunity created by the government using fiscal stimulus.
4.3. Implementation
