Black Wednesday

Today, October 8, 2008, the Indonesian stock market was suspended after the main index plunged more than 10 % in morning trade. What does it tell us all? We all will be affected by the global crisis (although officialdom won’t admit it). I personally think that the global financial crisis will sooner or later roll into the Indonesian economy. Those of you who are market players will really feel the pinch as stock prices go deep down the ravine. Price of preferred Bumi Resources shares dropped to only Rp 2,174 from the Rp 8,000 level. All Bakrie stocks dropped more than 40%. Officialdom meanwhile played down the seriousness of the possible impact of the global crisis on Indonesia’s economy (they have to be optimistic to promote a positive sentiment). Seen from the series of meetings by  the president, ministers and businessmen, the mood was optimistic and Indonesia has the necessary steps to cope with the looming crisis. They also believed there won’t be a repercussion of the 1998 crisis (underneath all that, they are all jittery). Central Bank Governor Boediono increased the BI rate to prevent the rupiah currency from devaluating. There won’t be any credit funds around (how can infrastructure projects continue without credit funds?). Government bonds (SUN) are no longer attractive. Trade Minister Mari Elka Pangestu was too optimistic. She said exports will not be affected much unless the global crisis is prolonged. She should have said “immediately prevent is import from countries affected by the crisis” to be credible on her part. Price of commodites such as CPO, coal, rubber, oil, nickel and others are falling (besides the resources are all over-exploited and drained out). And the likelyhood is that many people will be out of their jobs. From the social perspective, the greatest threat is unemployment and increasing number of poor people. Look at America which has become the model economy of the world. Although the US Congress finally passed the bill for the $700 billion bailout funds from the government, Americans are not better off. The market sentiment may be slightly up but will surely go down again. As for the ordinary Americans, they are feeling the real pain now. Indonesia has long been dictated by the West in implementing its economic policies. Now we have to pay back soon what we owed to them to save their own neck (the government has to renegotiate debts with Western creditors). The West bailed Indonesia out of crisis in 1998 but now, in the case of crisis, what can they bail us out with? It’s about time that we rise on our own feet and stop aping Western economic policies and engage in our own concept of people’s based economy.