1. September 2008 December 2008 February 2009 Early 2007 September 2007April 2008 October 2008...
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Ensuring Employment and Social Issues are Effectively Addressed in Response to the Crisis and Fiscal Stimulus Package Bambang Susantono, MCP., MSCE., Ph.D. Deputy Minister for Infrastructure and Regional Development Office of the Coordinating Ministry for 1
1. September 2008 December 2008 February 2009 Early 2007 September 2007April 2008 October 2008 February 2008 2
September 2008 December 2008 February 2009 Early 2007 September
2007April 2008 October 2008 February 2008 2
Slide 3
USAs Industrial Production & Capacity Utilization Economic
Growth in Asia Export Growth of Few Asian Countries Contraction
happened in many countries. Trade growth are declining. Capital
flee out of developing countries back to developed countries
Declining Capital Inflow in Indonesia Source: MoF, 2009 3
Slide 4
Source: Estimated from BPS IO 2005 4
Slide 5
Demand for labor has fallen Large-scale job losses in some
sectors Rising unemployment & underemployment Downward pressure
on wages leads to reducing purchasing power of middle and lower
income society SMEs (export oriented) have been hit hard Informal
economy has expanded Lower economic growth may deepen extreme
poverty More difficulties to meet the Millennium Development Goals
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Slide 6
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Slide 7
Global Crisis Impact to Employment (Contd) GDP and Employment
Simulation on 2009 Parameter GDP Growth (%) 5.554.5 Unemployment (%
to workforce) 7.98.38.6 Unemployment (Million people) 9.099.469.82
Growth of Job Opportunity (% to workforce) 2.201.871.53 Laid-off
(thousand person)100150200 Source: Ministry of Public Works, staff
estimates, 2009 7
Slide 8
7.44 8.87 8.34 7.00 8.00 9.00 10.00 11.00 12.00
FebNovFebAgustFebAgustFebAgtFebAgt 2005 2006200720082009 Crisiss
Impact to Open Employment Without CrisisCrisis Without PolicyCrisis
With Policy Source: Fiscal Policy Office Estimation, 2009 8
Slide 9
US FS US $ 787 (5,5% GDP) CC US $ 750 CI US $ 236 AP US $ 1100
China FS US $ 586 (13.3% GDP) CI US $ 19,2 France FS US $ 35 (1,3
GDP) CC US $ 50,3 CI US $ 17 Germany FS US $ 110 (3,25% GDP) CC US
$ 100,5 CI US $ 26 AP US $ 6,3 Nedherlands CC US $ 25,1 CI US $
22,3 Russia FS US $ 61-62 (2,3-2,5% GDP) CC US $ 26,6 CI US $ 20,3
AP US $ 6 Saudi Arabia CI US $ 2,7 South Korea FS US $ 51,2 (7,5%
GDP) CC US $ 15,5 CI US $ 2,3 AP US $ 3,8 UK FS US $ 29 (1% GDP) CC
US $ 71 CI US $ 52,6 AP US $ 71,0 Australia FS US $ 37 (2% GDP) AP
US $ 5,2 Brazil AP US $ 3,8 Canada FS US $ 33 (2,5% GDP) AP US $
59,6 Japan FS US $ 154 (3,1% GDP) CC US $ 120 AP US $ 27,6 Spain AP
US $ 62,8 Italy FS US $ 10 (0,4% GDP) CC US $ 25,1 Source: Note of
IMF from G20 Minister and Central Bank GOvernor Meeting March 13
14, 2009 CC : Commitment on Capital on Debt Guarantee CI: Capital
Injection to Banking Sector (Recapitalization) AP : Toxic Asset
Program (Asset Recovery) Source : Reuters FS : Updated Fiscal
Stimulus April 9 2009 India FS US $ 4 (0,4% GDP) Indonesia FS US $
7,33 (1,5% GDP) Turkey FS US $ 10,28 (1,5% GDP) 9
Slide 10
1. Tax Saving Tariff of Income Tax + Individual + Non-taxable
Income USD 4,3 B (0,8% GDP) 2. Tax and Government-Borne Import Duty
Subsidy to business entities VAT Oil & gas exploration USD 0,35
B (0,07% GDP) Import Duty Subsidy for Raw Material and Capital
Goods USD 0,25B (0,05% GDP) Income Tax USD 0,65 B (0,12% GDP)
Income Tax on Geothermal USD 0,08 B (0,02% GDP) 3. Subsidies and
Government Spending for business entities for job creation purposes
Decreasing the oil price (Gasoline Subsidy) USD 0,28 B (0,05% GDP)
Discount for Industrial Electric Fee USD 0,14 B (0,03% GDP)
Additional Budget for Infrastructure USD 1,22 B (0,2% GDP) Widening
the PNPM USD 0,06 B (0,01% GDP) TOTAL USD 7,33 B ( 1,5% GDP)
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Slide 11
1. Increasing purchasing power (price subsidy on generic
medicine, price subsidy on palm oil, VAT free for several products)
2. Increasing competitiveness and durability of power of enterprise
and export (Tax holiday, reduce the electricity tariff for
industry, decrease solar pricing, financing the SME and export
guarantee) 3. Increasing Infrastructure Budget Allocation for
Local-Resource Based (Rehabilitation on roads, airports, seaports,
railways, housing, traditional market, rice warehouse,
strengthening the Workforce Training Houses, etc) 11
Slide 12
Development of traditional market infrastructure Development of
distribution piped water system and treatment plant Development of
special housing for fisherman, and remote areas Development and
rehabilitation of main irrigation system Development of rural road
and irrigation Housing Development of self sufficient of
electricity in village Rehabilitation of natural disaster impact
Growth Support economic growth Growth Support economic growth Basic
Needs Fulfill basic standard Basic Needs Fulfill basic standard
Generating and Transmission electrical network Development and
Rehabilitation of Airports Development and rehabilitation railway
Development and rehabilitation of seaport Job Creation of
Infrastructure Development Multi-Year Contracts Road Project
Multi-Year Contracts Road Project 12
Slide 13
Women likely to face larger increase in unemployment Concerns
of increasing school drop-out and rising in child labor Widening
inequality Decreasing power to repay mortgage increasing number of
homeless Growing concern on Local-Resource Based usage for physical
infrastructure to enhance job creation 13
Slide 14
USD 0,3 M is allocated for each district per annum to more than
5,720 districts Constructing roads, bridges, water supplies,
traditional markets, irrigation channels, and electricity 14
Slide 15
In order to boost job creation through Stimulus Package Program
there is a growing concern to use the effective method in
conducting Infrastructure Development Projects Government on
Indonesia tends to use Labor Intensive Method to fulfill stimulus
objectives, encouraging projects that will create jobs for society
Alternative method that is proved more efficient than EB and more
effective than LI in several countries 15
Slide 16
LRB Advantages Create more productive jobs and improving income
distribution Increasing productivity Reducing environmental
degradation and optimizing the use of renewable resources
Increasing spin-off and multiplier effects on the local economy
Facilitating institutional reforms Increasing opportunities for
community participation, gender equity and local ownership
Integrating climate change issues, economic growth, social
development, poverty reduction 16
Slide 17
If employment-intensive approaches would be used for 50% of the
infrastructure investments under the 2009 ESP, this would create
about 1 million additional jobs. Reducing rural poverty : Improving
rural infrastructure; Improving use of natural resources, and
Increasing empowerment and participation of the poor (with greater
equality between men and women) 17