Difference between 1998 and 2018

Name: Difference between 1998 and 2018
Uploaded: 2018-09-22T07:19:32Z
Duration: 20 min 32 s
Description: Have you ever heard the adage l\'histoire se repete (history repeats itself)? Perhaps that is what we are experiencing at present. For example, Indonesia again hosted the 18th Asian Games, in which both the event and the athlete\'s achievements were a great success: Indonesia finished fourth best in Asia.

Have you ever heard the adage l\'histoire se repete (history repeats itself)? Perhaps that is what we are experiencing at present. For example, Indonesia again hosted the 18th Asian Games, in which both the event and the athlete\'s achievements were a great success: Indonesia finished fourth best in Asia.

Santo Rizal Samuelson

· 7 minutes read

Have you ever heard the adage l\'histoire se rÉpÉte (history repeats itself)?

Perhaps that is what we are experiencing at present. For example, Indonesia again hosted the 18^th Asian Games, in which both the event and the athlete\'s achievements were a great success: Indonesia finished fourth best in Asia. This is a repeat of the success Indonesia saw as the host nation of the fourth Asian Games in 1962, when it finished in second behind Japan.

After Indonesia hosted the 1962 Asian Games, the host of the 18^th Olympics – the 1964 Tokyo Games – was Japan. History will repeat itself as, after the Jakarta-Palembang Asian Games, Tokyo will again host the Olympics – this time the 32^nd Games – in 2020.

In May 2018, the final match of the UEFA Champions League (UCL), which pits the best European clubs against each other, took place between Real Madrid and Liverpool in Kiev, Ukraine. This meeting was a repeat of the 1981 UCL final in Paris, France.

All of these phenomena seem to prove the adage that history repeats itself. In 1981, there were also major historical events, namely the royal wedding between Prince Charles and Princess Diana and the election of Mahathir Mohamad as prime minister of Malaysia. History then repeated in 2018 with a marriage between Charles’ and Diana\'s youngest son, Prince Harry, and Meghan Markle, while in Malaysia, Mahathir Mohamad was reelected as prime minister.

Something being forced

Historical narratives are also recurring, as if they are being forced to happen. Political tension is heating up ahead of the 2019 presidential election and difficult economic conditions have arisen due to external pressure: the US-China trade war as a trigger for the weakening of the rupiah exchange rate has made noise, making it seem like the 1998 crisis has returned.

We have to respond to this phenomenon wisely because it has the potential to be utilized by certain parties for pragmatic political interests, to say nothing of the stupidity and misguided thinking it would encourage.

In reality, even though the value of the rupiah fell equally, the conditions in 1998 and 2018 are very different. In 2018, Indonesia is better equipped to face an economic crisis. There are economic and political aspects that explain the phenomenon.

From an economic perspective, comparing economic data from last year is more fair and a better apples-to-apples comparison. The rupiah per US dollar indeed depreciated from Rp 13,345 in September 2017 to Rp 14,815 in September 2018, but this decline was only 11 percent.

This was very different from the fall of the rupiah exchange rate to 254 percent: from Rp 3,030 in September 1997 to Rp 10,725 in September 1998. If it is to be equated, the rupiah exchange rate per US dollar in September 2018 should be at the level of Rp 47,242.

Other economic data shows that Indonesia\'s economic growth year-on-year (yoy) in the second quarter in 1998 was minus 13.34 percent, while in 2018 it was positive at 5.27 percent. The negative economic growth at that time had implications on the net capital inflow in the second quarter of 1998, which was recorded at minus US$2,470 billion. Compare that with data from 2018, which recorded a positive level of $4,015 billion.

Low inflation

Yoy inflation in August 2018 was stable at 3.2 percent, while in August 1998 it was at 78.2 percent. In comparison, Indonesia\'s 2018 foreign exchange reserves were recorded at $118.3 billion, with the government debt rating in 2018 at investment grade, which means it is worthy of investment.

Meanwhile, foreign exchange reserves in 1998 amounted to $23.61 billion with government debt securities being rated as junk, which meant doubtful or worthless.

Another critical aspect is that the current political conditions are far more stable than in 1998. Despite the political commotion and the many hoaxes, the level of trust in the Jokowi-Kalla government and the working Cabinet is still relatively high compared to the New Order government during its time.

The conditions of the economic crisis in 1998 were worsened by a political crisis. Trust in President Soeharto was at a nadir, not only among students and the community, but even in the VII Development Cabinet.

Fourteen economic and industrial ministers at that time proposed a motion of no confidence and refused to join President Soeharto\'s Reform Cabinet, then signed the "Bappenas Declaration". The signees were Akbar Tandjung, AM Hendropriyono, Ginandjar Kartasasmita, Giri Suseno Hadihardjono, Haryanto Dhanutirto, Justika S. Baharsjah, Kuntoro Mangkusubroto, Rachmadi Bambang Sumadhijo, Rahardi Ramelan, Subiakto Tjakrawerdaya, Sanyoto Sastrowardoyo, Sumahadi, Theo L. Sambuaga and Tanri Abeng.

The withdrawal of dozens of ministers was a huge blow for Seoharto as he was forced to quit on May 21, 1998, and was replaced by BJ Habibie.

Solid working Cabinet

The current state of the working Cabinet is solid and conducive to progress. Even if there is a minister who resigns, such as Social Affairs Minister Idrus Marham, it is not because of a motion of no confidence, but because of alleged corruption.

Nevertheless, the government still has to take preventive measures quickly to prevent speculation. We should appreciate various government economic policy packages and infrastructure development, and a balanced and healthy State Budget (APBN) to encourage economic growth, improve competitiveness, and reduce regional economic disparities.

However, in order to face global challenges that are not easy, according to the writer, the government must at least focus more on two aspects.

The first is to bring Indonesian trade balance back toward positive growth. Statistics Indonesia data shows the cumulative trade balance for the January-July period in 2018 was a deficit of $3.09 billion, while in the same period in 2017, a surplus of $7.39 billion was recorded. The trade balance deficit has a direct impact on the depreciation of the rupiah against the US dollar. With an exchange rate of around Rp 14,800 per US dollar as of September 2018, this means that the exchange rate has weakened 9.14 percent from January 2018. In fact, in the previous year, it had strengthened by an average of 1 percent.

Reducing imports – especially consumptive and luxury goods, as well as those that are produced domestically — and increasing value-added exports with a fixed price would allow the trade balance to grow positively. It is also important for the government to ensure that, if necessary, regulations are made so that export proceeds can flow into the country.

Indonesia’s active role

Kompas daily noted (5/9/2018) that, as of June 2018, foreign exchange earnings from exports were $69.88 billion, of which $64.74 billion or 92.6 percent entered domestic banks. Of this amount, only $8.62 billion or 13.3 percent of revenues were converted to the rupiah. The provision of attractive export incentives is needed so that foreign exchange proceeds from exports do not flow abroad.

The second important factor is Indonesia\'s active participation on a global scale. Whatever the condition, the phenomenon of the current trade war cannot be resolved only by prioritizing the national interests of individual countries. The America first and China first approaches and the moves to retaliate in the tariff war will only harm the countries that are in "dispute" as well as other countries, especially developing countries (emerging countries). This is where the active role of Indonesian representatives will be very vital.

Indonesia\'s presence in world economic and political forums such as the G-20, APEC, the World Bank and the United Nations should not be merely ceremonial – Indonesia must be willing to speak out against all forms of egocentrism in world trade. Indonesian ambassadors have very good capital that benefits not only national interests but also other developing countries and the ASEAN region.

Indonesia can also encourage the superpowers in the global arena, such as the US, China, Russia, Japan, South Korea and the European Union, to reduce their egos for the interests of the world.

It is true that history can repeat itself. However, imposing historical narratives without looking deeper is another form of public misdirection.

Santo Rizal Samuelson, Economist, Observer of Indonesian Economy and Politics

Editor:

Joko widodo Sandiaga Uno Prabowo Subianto Ma’ruf Amin Mahathir Mohamad exchange rate santo rizal samuelson