Bureaucracy Hinders Growth of Credit
Thursday, 05 October, 2006 | 15:48 WIB

Tempo Interactive, Jakarta: The government has been asked to improve the system of bureaucracy which is related to the business world.

Economists have evaluated that without improvements to bureaucracy, Bank Indonesia's attempts to decrease the BI Rate will not have an optimum effect on the real sector.

Ryan Kirnanto, the senior economist of PT Bank Negara Indonesia Tbk, said that the price one must pay for bureaucracy, either legally or illegally, is quite expensive and will increase the cost of production in the business world.

In addition, should the decrease in the BI Rate not be followed with other policies, “Economic growth will certainly be stagnant,” he told Tempo yesterday (10/4) in Jakarta.

In addition, he went on to say, the impact of the fuel price increases in October last year has not fully disappeared.

Up until recently, people's purchasing power was still low.

Therefore, the business world is still reluctant of to ask for new loans to increase production.

“Entrepreneurs feel that the market is not yet to absorb increases in production,” he said.

Ryan said that there are several measures that the government may do in order to boost real sector: increasing expenditures; pushing execution of labor-intensive and capital-intensive projects; and giving tax relief for certain business sector having multiple effect.

Djoko Retnadi, the economist of PT Bank Rakyat Indonesia, explained that real sector in Indonesia still had to face complicated structural matters.

As a result, the mechanism of monetary transmission—through decreases in the interest rate—to the real sector is blocked.

However, during this year, the BI Rate has significantly decreased to 11.25 percent.

Djoko emphasized that bureaucracy improvements were extremely important and needed to remove overlapping and inconsistent regional regulations.

“Bureaucracy has killed the business world,” he said.

“Bank Indonesia's attempt only deals with one side. The non-monetary side is much tougher,” he said.

Suryani Ika Sari
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