Financial Crisis Hits Village Industries
Wednesday, 12 November, 2008 | 14:16 WIB

TEMPO Interactive, Jakarta: Vice President Jusuf Kalla has acknowledged that the government cannot do much in preventing global crisis from affecting industries using commodities from villages.

The crisis is different with the crisis 10 years ago when it hit city-based industries.

“We cannot do a lot. Before it was an urban crisis, now it is a rural crisis,” said Kalla when opening the conference of United Nations Development Programme (UNDP) at the Sultan Hotel in Jakarta yesterday (11/11).

The Vice President explained that the crisis has made world commodity prices lower than prices earlier this year.

Therefore, exported commodities continue to weaken, private sector incomes have dropped and rural purchasing power has plunged by up to 50 percent.

One indirect effect has been that government revenues from taxes have been reduced.

This is in spite of the fact that state revenue is needed to build infrastructure like harbors, roads, and dams.

“However, we are trying to overcome this by working together with international agencies,” said Kalla.

He said expected that the crisis would not worsen city-based industries.

“Because our economic foundations are actually better than 10 years ago,” said Kalla.

He cited the property and banking sectors as city-based industries that are still running normally.

“If there is no significant pressure, the government is optimistic that economic growth can reach eight percent by 2010,” said Kalla.

UNDP official, Ajay Chhibber, warned developing countries like Indonesia to be aware that the financial crisis could increase poverty and unemployment.

The domestic market must be stronger like in China and India.

“Basically, the economic foundations in Indonesia are better and continuously progressing,” said Ajay.

ANTON APRIANTO | NIEKE INDRIETTA