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

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  • Slide 1
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  • September 2008 December 2008 February 2009 Early 2007 September 2007April 2008 October 2008 February 2008 2
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  • 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
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  • Source: Estimated from BPS IO 2005 4
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  • 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 5
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  • 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
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  • 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
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  • 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) 10
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  • 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
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  • 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
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  • 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
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  • 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
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  • 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
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  • 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
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  • 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
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  • Thank You Involvement of Women19 19