Govt to team up with central bank to revive economy

Ary Hermawan, The Jakarta Post, Jakarta

Finance Minister Sri Mulyani says the government will work hand in hand with the central bank to boost the still-sluggish real sector amid criticism that the current administration is doing too little to speed up the pace of economic growth.

Speaking to reporters Thursday, Mulyani said the government and Bank Indonesia would now focus on promoting financing schemes to support small and medium enterprises (SMEs).

In order to do so, the government would both reform existing schemes and create new ones to ensure that SMEs could secure easier access to financing.

"The government will push for the expansion of the credit insurance industry so that the banks will be more willing to extend loans to SMEs," she said, adding that one of the programs would involve boosting the financing capabilities of state-owned credit insurance company PT Asuransi Kredit Indonesia (Askrindo) so that it could guarantee more loans to the SME sector.

The programs will also include the strengthening of state-owned financing firm PT Perum Sarana Pengembangan Usaha so as to enable it to provide financing alternatives for small businesses, she said.

"We're still discussing the matter with Bank Indonesia, including the question of the ownership of these two state enterprises," she said.

Against charges that the government had not done enough to revive the economy, Mulyani argued that the government had actually done a great deal to date so as to promote cooperatives and SMEs, especially in the agricultural and fisheries sector.

The Cabinet economics team under Coordinating Minister for the Economy Boediono has been criticized for focusing on maintaining macroeconomic stability, while neglecting efforts to revive the real sector.

Mulyani said the government had helped SMEs clinch loan agreements worth Rp 462 billion (US$51.3 million) with various financial institutions, but only Rp 43 billion of the loan commitments had been drawn down.

"There is something going wrong here. We have ensured the funds are available, but the demand has been desultory," she said.

Since 1999, the government has made available Rp 3.1 trillion for channeling to the SME sector as loans through state financing firms, such as PT Permodalan Nasional Madani (PNM), and local government-owned banks (BPDs). As of the end of March, Mulyani said, the firms had used up Rp 2.75 trillion of these funds.

The government, she said, now planned to increase the funding for SME loans channeled through PT PNM by Rp 60 billion to Rp 340 billion, and for those extended through Bank Bukopin by Rp 85 billion to Rp 435 billion.

The government was also readying a package of regulations aimed at strengthening the SME sector, which Coordinating Minister for the Economy Boediono said would tackle problems pertaining to financing and market access for SMEs, human resources development, regulatory reform and tax incentives. It is unclear, however, when the details of the package will be made public.

Business associations have complained about a lack of linkages between the financial sector and the SME sector. They say that the lack of credit insurance schemes is one of the major obstacles that prevent SMEs from securing loans.

Vice President Jusuf Kalla recently urged bankers to increase lending to the SME sector, which according to the Central Statistics Agency accounts for 50 percent of GDP.
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