tugas softskill

WIDIAWATI
27211383
3EB23

ASIAN FINANCIAL CRISIS IN INDONESIA

1.The Asian Financial Crisis started on 2 July 1997 when the Thai government, burdened with a huge foreign debt, decided to float its baht after 2.currency speculators had been attacking the country's foreign exchange reserves. This monetary shift was aimed at stimulating export revenues but proved to be in vain. It soon led to a contagion effect in other Asian countries as foreign investors 3.who had been pouring money into the 'Asian Economic Miracle countries' since a decade prior to 1997 - lost confidence in Asian markets and dumped Asian currencies and assets as quickly as possible.

The Indonesian Crisis Begins

Although the Asian region showed worrying signs 4.foreign investors initially kept confidence in the Indonesian technocrats' ability to weather the financial storm  5.(as they had done before in the 1970s and 1980s). But this time, however, 6.Indonesia would not get off scot-free. It became the hardest-hit country 7.because the crisis not only had economic but also significant and far-reaching political and social implications.

When pressures on the Indonesian rupiah became too strong, 8.the currency was set to float freely starting from August 1997. Soon it began depreciating significantly. By 1 January 1998, the rupiah's nominal value was only 30 percent of 9.what it had been in June 1997. In the years prior to 1997 10.many private Indonesian companies had obtained unhedged, short-term offshore loans in dollars, and this enormous private-sector debt turned out to be a time bomb waiting to explode. The continuing depreciation of the rupiah only worsened the situation drastically. Indonesian companies rushed to buy dollars, thus putting more downward pressure on the rupiah and exacerbating the companies' debt situation. 11.It was certain that Indonesian companies (including banks; some of which were known to be very weak) would suffer huge losses. New foreign exchange supplies were scarce as new loans for 12.Indonesian companies were not granted by foreign creditors. 13. As the government of Indonesia was unable to cope with this crisis it decided to seek financial assistance from the International Monetary Fund (IMF) in October 1997.

The IMF Arrives and Chaos Continues

14.The IMF arrived in Indonesia with a bailout package totaling USD $43 billion to restore market confidence in the Indonesian rupiah. In return it demanded some fundamental financial reform measures: the closure of 16 privately-owned banks, the winding down of food and energy subsidies, and it advised the Indonesian Central Bank (Bank Indonesia) to raise interest rates. But this reform package turned out to be a failure. The closure of the 16 banks (some controlled by Suharto's cronies) triggered a run on other banks. Billions of rupiah were withdrawn from saving accounts, restricting the banks' ability to lend and forcing the Central Bank to provide large credits to the remaining banks to avert a complete banking crisis. Moreover, the IMF did not try to curb Suharto's system of patronage 15.that was damaging the country's economy and undermining the IMF accord. This patronage system 16.was Suharto's tool to maintain power; in exchange for political and financial support, 17.he gave powerful positions to his family, friends and enemies (thus becoming cronies). Other developments that were negatively impacting on Indonesia towards the end of 1997 were a serious El-Nino drought (causing forest fires and bad harvests) and increased speculation about Suharto's deteriorating health (causing political uncertainties). Gradually, 18.Indonesia was heading towards a political crisis.  

A second agreement with the IMF was needed as 19.the economy was continuing its downward spiral. In January 1998 the rupiah lost half of its value within the time-span of five days only, causing Indonesians to hoard food. This second IMF agreement contained a detailed 50-point reform program, including provisions for a social safety net, a gradual phasing out of certain public subsidies and the tackling of Suharto's patronage system by ending monopolies of a number of his cronies. However, reluctance of Suharto to implement this structural reform program faithfully, meant that 20. the situation did not improve. Critics of the IMF, however, point out that the institution pushed for too much reform within too little time, thereby worsening the Indonesian economy. The IMF indeed made errors in its initial approach to the Indonesian crisis but it did come to realize that the key in overcoming this crisis was to restart private capital flows to Indonesia. In order for this to happen the patronage system had to be broken down.

	1996	1997	1998
GDP growth  (annual percent change)	8.0	4.7	-13.6
Inflation growth  (annual percent change)	6.5	11.6	65.0

^{Source: Hill, H. (2000). The Indonesian Economy, p. 264}

A third agreement with the IMF was signed in April 1998. The Indonesian economy and social indicators were still showing worrying signs. But this time, however, the IMF was more flexible in its demands than on previous occasions. For instance, large food subsidies for low-income households were granted and the budget deficit was allowed to widen. But the IMF also called for the privatization of state-owned companies, faster action on bank restructuring, a new bankruptcy law and a new court to handle bankruptcy cases. It also insisted on a closer monitoring of its implementation as recent experiences had shown that the Indonesian government was not fully committed to the reform agenda.

KETERANGAN :

1.       .The Asian Financial Crisis started on 2 July 1997 = simple past tense

2.       .currency speculators had been attacking the country's foreign exchange reserves. = past perfect continous tense

3.       who had been pouring money = past perfect continous tense

4.       foreign investors initially kept confidence = simple past tense

5.       as they had done before in the 1970s and 1980s = past perfect tense

6.       Indonesia would not get = past future tense

7.       because the crisis not only had economic but also = simple past tense

8.       he currency was set to float freely = simple past tense

9.       what it had been in June 1997 = past perfect tense

10.   many private Indonesian companies had obtained unhedged = past perfect tense

11.   It was certain that Indonesian companies = simple past tense

12.   Indonesian companies were not granted by foreign creditors = simple past tense

13.    As the government of Indonesia was unable to cope = simple past tense

14.   The IMF arrived in Indonesia with a bailout package totaling USD $43 billion =simple past tense

15.   that was damaging the country's economy = past continous tense

16.   was Suharto's tool to maintain power = simpe past tense

17.   .he gave powerful positions to his family = simple past tense

18.   Indonesia was heading towards a political crisis = past continous tense

19.   the economy was continuing its downward spiral = past continous tense

20.   the situation did not improve = simple past tense