Most of us enter the new year of 2009 with mixed feelings. What will happen this year? The global economic crisis that will very likely leadto economic depression in certain economies is haunting us. Each country has its own problems, and its policy makers are working very hard now, individually or through regional or global cooperation, to minimize the effect of the turbulence.
Indonesia is not an exception, as the country’s money market, capital market and supply of direct foreign investment are exposed to the global economic climate. We are lucky to have a Minister of Finance who also functions as a Coordinating Minister of Economic Affairs, working together with the Bank Indonesia Governor, who both agreed to quickly respond to the threats of economic depression by issuing several policies that would enable the country to sustain the rotation of economic wheels. Sri Mulyani and Budiono are both acknowledged by the public as persons of the highest integrity, and despite political pressures and in-fighting, they have proven themselves to be capable leaders in a time of crisis.
The most difficult part ahead is perhaps the fact that our economic problems will be compounded by political tension, with the coming general election of the Indonesian parliament in April 2009 and the Presidential and Vice Presidential election in August 2009. Political parties have started campaigning, and of course are understandably trying very hard to secure political financing from their constituents, business people and corporations, who at the same time are having problems with their tight budget policies. Several politicians have also started to do profiling for themselves as candidates. In Indonesia’s young democracy, we should expect to hear about smear campaigns between politicians. Let’s hope that the government and Central Bank will be able to maintain and sustain manageable macro economic factors, continue to provide micro credits to small and medium scale economies, help corporations to reorganize and restructure their debts and their organizations, provide people with transparent policies on foods and energy prices, help farmers with affordable fertilizer price, and create programs for education and health care for the poor.
Some clients have already asked questions on how to prepare themselves for the worst. We do not do magic, but learning from our extensive experience in the last economic crisis in 1997-1998, we have advised such clients with rational steps of safety measures. First, corporations need to review their positioning in their executed contracts. If the positioning is weak or may create a problem, there is always an opportunity to re-negotiate. Everything is negotiable. And at a time like this, it’s worth doing. Second, new contracts need to be carefully drafted as to not create a contingent risk for the company, its management, shareholders and stakeholders. Such carefully drafted contracts will help when it becomes a dispute. Judges will understand the parties’ original intentions better, and no loopholes could be used to manipulate the settlement of the case. Corrupt practices involving the judiciary are often created by commercial deals or transactions that contain such loopholes. Third, it may be necessary to do an internal due diligence of their corporations in legal, financial, commercial, environmental, fiscal and other issues. The process shall involve internal resources as well as independent professionals. The purpose of the due diligence process is to find out if there is any aspect of the company’s operations that would expose it to business, legal and other risks. The result of the due diligence will also be useful for the management to make a new direction in this time of crisis.
Dealing with investors, business partners, bankers, labor unions, suppliers, contractors, tax office, policy makers and stakeholders is now taking place in a totally different arena, packed tightly with sensitive issues. At this opportunity, we wish you safe and sound business dealings in 2009, and hopefully we will all be able to navigate this rough time with dignity and integrity.
Arief T. Surowidjojo
Chief Executive Officer