VIVIR DESDE LA RESPUESTA

Appendix 2.A

Chronology of monetary measures and financial deregulations, 1970-93

197 0 B a n k In d o n e s ia (B l) is s u e d S B Is as th e ir o w n lia b ility 1971 - S B Is d is c o n tin u e d - R u p ia h p e g g e d to $ U S - N o fo re ig n e x c h a n g e c o n tro ls - O p e n c a p ita l a c c o u n t - N o n e w e n try a n d n e w o p e ra tio n s o f b a n k s a n d N B F Is 197 4 - Bl o rg a n is e d an in te rb a n k c a ll m o n e y m a rk e t, in c lu d in g a local c le a rin g s y s te m

- c re d it c e ilin g s im p o s e d o n all d o m e s tic b a n k s e x c e p t fo r c re d its e x te n d e d in c e rta in p rio rity s e c to rs w h ic h c o n tin u e d to re c e iv e s u b s id is e d liq u id ity c re d its fro m Bl

N o v e m b e r 78 - D e v a lu a tio n o f R u p ia h (50 % ) - R u p ia h w a s p e g g e d to b a s k e t o f c u rre n c ie s o f In d o n e s ia 's m a in tra d in g p a rtn e rs - A m a n a g e d flo a t s y s te m in tro d u c e d , th e n o m in a l e x c h a n g e rate w a s to be d e v a lu e d on a re g u la r b a s is b y s m a ll a m o u n ts , a n d a v e ra g e d a b o u t 3 % p e r a n n u m 197 9 Bl in tro d u c e d fo re ig n e x c h a n g e s w a p fa c ility — "s w a p s "— O c to b e r 82 Bl ta k e s 2 % m a rg in fo r s w a p s F e b ru a ry 8 3 B l re d u c e d s w a p m a rg in to 0 .2 5 % 1 9 8 3 S e v e re p re s s u re on R u p ia h M a rc h 83 - 3 9 % d e v a lu a tio n of R u p ia h J u n e 83 F in a n c ia l D e re g u la tio n P a c k a g e : - E lim in a tio n o f c re d it c e ilin g

- E lim in a tio n o f all c e ilin g s on d e p o s it ra te s o f in te re s t a n d m o s t loan ra te s o f in te re s t

- Bl liq u id ity c re d its s ig n ific a n tly re d u c e d b y te rm in a tin g a n u m b e r o f th e h ig h p rio rity c re d it s c h e m e s

F e b ru a ry 8 4 Bl re is s u e d S B Is o n c e a w e e k w ith 3 0 - a n d 9 0 - d a y m a tu rity S e p te m b e r 8 4 SB I is s u e d d a ily a n d m a d e e lig ib le fo r re d is c o u n t by Bl

O c to b e r 84 S B Is w ith 1 5 - d a y m a tu rity is s u e d

F e b ru a ry 85 - S B P U in tro d u c e d w ith 3 0 - to 9 0 - d a y m a tu rity

- F ic o rin v e s t, an N B F I a n d B l a ffilia te , n a m e d a s m a rk e t m a k e r fo r S B P U

M a y 85 1 5 -d a y m a tu rity S B I d is c o n tin u e d J u ly 85 S B Is b e g a n to be a u c tio n e d d a ily

A u g u s t 85 - In te rb a n k lo a n lim its ra is e d to 1 5 % fo r R u p ia h fu n d s fro m th ird p a rtie s - S B P U m a tu rity ra is e d to 180 d a y s - S B I is s u e d c o u ld b e re d is c o u n te d a t F ic o rin v e s t o r Bl w ith o u t p e n a lty A u g u s t 86 S B I is s u e d o n w e e k ly b a s is o n ly S e p te m b e r 86 A m a jo r d e v a lu a tio n o f R u p ia h (5 0 % ) O c to b e r 86 - B a n k s ' m in im u m s w a p s p re m iu m ra is e d to 8 % - R e m o v a l o f c e ilin g on s w a p s

D e c .1 9 8 6 - J a n .1 9 8 7 S e v e re p re s s u re on R u p ia h M a y - J u ly 1 9 8 7 - B a n k s ' m in im u m s w a p s p re m iu m ra is e d to 9 % - S B I o ffe r ra te in c re a s e d - Bl d is c o u n t ra te ra is e d to 19% - B a n k s re q u ire d to re p u rc h a s e la rg e p o rtio n s of o w n S B P U s b e fo re m a tu rity - B a s ic d is c o u n t rate in c re a s e d to 3 0 %

- B a n k d e p o s its o f m a jo r sta te e n te rp ris e s (B U M N ) tra n s fo rm e d into S B I h o ld in g s

- F o re ig n e rs a llo w e d to in v e s t in d o m e s tic p o rtfo lio s O c to b e r 88 F in a n c ia l d e re g u la tio n p a c k a g e (P A K T O 2 7 ,8 8 )

- F re e d up e n try a n d o p e ra tio n s o f b a n k s a n d N B F Is ie, a ll lim its on d o m e s tic b a n k b ra n c h in g re m o v e d ; fo re ig n b a n k s p e rm itte d to fo rm jo in t v e n tu re w ith lo c a l p a rtn e rs (8 5 % m a x im u m fo re ig n p a rtn e r w ith a m in im u m p a id up c a p ita l re q u ire m e n t o f $ 3 0 m illio n ); fo re ig n b a n k s a lre a d y p re s e n t in J a k a rta a llo w e d to b ra n c h o u t to s ix m a jo r p ro v in c ia l c itie s - L o w e r re s e rv e re q u ire m e n ts (fro m 1 5 % to 2 % ), h o w e v e r, b a n k s

h a d to b u y S B Is w ith 3 - 6 m o n th m a tu rity u p to 8 0 % o f th e in c re a s e d

fu n d s

- S w a p tie d to fo rm u la a n d m a tu rity le n g th e n e d to 3 y e a rs - T w o - d a y s e ttle m e n t fo r fo re ig n e x c h a n g e tra n s a c tio n s

- S ta te e n te rp ris e s a llo w e d to p u t 5 0 % o f d e p o s its o u ts id e th e s ta te b a n k s

- M a x im u m le g a l le n d in g lim its im p o s e d on b a n k s a n d N B F Is (as a % o f le n d e r's c a p ita l); 2 0 % to a s in g le b o rro w e r, a n d 5 0 % to a g ro u p o f b o rro w e rs

M a rc h 89 F in a n c ia l d e re g u la tio n p a c k a g e (P A K M A R 89)

- C e ilin g s on fo re ig n b o rro w in g s b y b a n k s w ith fo re ig n e x c h a n g e lis e n c e s lifte d

- N e t o p e n fo re ig n e x c h a n g e p o s itio n (o v e rn ig h t fo re ig n e x c h a n g e p o s itio n ) lim its p la c e d on b a n k s e q u a l to 2 5 % o f th e ir c a p ita l J a n u a ry 90 F in a n c ia l d e re g u la tio n p a c k a g e (P A K J A N 90)

- A b o litio n o f Bl s u b s id is e d re fin a n c in g fa c ilitie s (liq u id ity c re d its ) w h ic h g a v e c re d its a t (b e lo w m a rk e t) in te re s t ra te s fro m 3 % to 1 4 .5 % to b a n k s w h ic h th e n le n t to p rio rity s e c to rs a t b e lo w m a r­ k e t in te re s t ra te s e x c e p t f o r : c e rta in fo o d s to c k s , in v e s tm e n t c re ­ d it fo r d e v e lo p m e n t b a n k s , N B F Is a n d e s ta te s , w o rk in g c re d its fo r fa rm e rs , a n d c e rta in c re d its fo r c o o p e ra tiv e s . H o w e v e r, in te ­ re s t ra te s on th e s e c re d its w e re in c re a s e d at le a s t to n e a r-m a r­ k e t le v e ls

- N a tio n a l b a n k s re q u ire d w ith in o n e y e a r to a llo c a te a m in i­ m u m o f 2 0 % o f lo a n p o rtfo lio to s m a ll b u s in e s s , d e fin e d a s h a v in g a s s e ts o f le ss th a n Rp 6 0 0 m illio n , e x c lu d in g la n d a n d e a c h lo a n n o t e x c e e d in g R p 2 0 0 m illio n . F a ilu re to d o th is a llo ­ c a tio n w o u ld a ffe c t "s o u n d n e s s o f th e b a n k "

- F o re ig n /jo in t- v e n tu re b a n k s re q u ire d to e x te n d 5 0 % o f th e ir c re d its to e x p o rt-o rie n te d in d u s trie s

F e b ru a ry 90 S ta te e n te rp ris e s re q u ire d to c o n v e rt th e ir d e p o s its w ith d o m e s tic b a n k s in to S B I h o ld in g s . F e b ru a ry 91 P o lic y p a c k a g e on b a n k s u p e rv is io n - C a p ita l a d e q u a c y b a s e d on th e s ta n d a rd s e t b y B IS , w ith a m in im u m a m o u n t o f 8 % o f th e ris k -w e ig h te d a s s e ts a n d c a n be d o n e in s te p s : 5 % a t th e e n d o f M a rc h 1 9 9 2 ; 7 % a t th e e n d o f 104

March 1993; 8% at the end of December 1993

- Liquidity credits subject to limits except for farm enterpri­ ses (KUT), credit to cooperatives, and to the State Logistic Agency (BULOG)

- Net open position for all currencies at the maximum 20% of the capital, the maximum amount for each currency set at 25% of the capital

- Maximum bank swap to Bank Indonesia 20% of the capital (from 25%), maturity of reswap longer than 1 month and up to 3 years

- State enterprises and agencies' deposits with domestic banks converted into special SBI at the rate of 22 per cent

- Regulations on opening new bank branches__________________ October 91 Imposition of ceilings on offshore borrowing by banks

October 92 Financial deregulation package (PAKTO 30,92)

- New banks paid-up capital increased from Rp10 billion to Rp50 billion for national commercial banks and from Rp50 billion to Rp 100 billion for foreign/joint-venture banks.

- Rural banks (BPR) allowed to open branches in cities and local districts (Kabupaten) previously prohibited.

- National commercial banks, state-owned banks, and rural banks allowed to merger if assets which resulted from merger not more than 20% of commercial banks' asset.

- Foreign investors allowed to hold up to 49% of the shares of Indonesian banks

- New rules for insurance companies; penalty for late financial reports

May 93 Financial deregulation package (PAKMEI 93):

- Legal lending limit to a group of borrowers was reduced to 20 per cent of lender's capital

- Banks that cannot meet their allocations of credits to small firms allowed to buy other banks small loans promissory notes -New regulations on items of capital for capital adequacy ratio

Sources: Bank Indonesia, Annual Report, various issues, Jakarta.

Cole, D.C. and Slade, B.F., 1990b. 'Development o f money market in Indonesia', the Harvard Law School and Harvard Institute o f International Development, mimeo, Boston, M .A.

Appendix 2.B

Macroeconomic adjustment policies 1983-93

Policies 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 E xchange —-

ra te 1 2 3 4 5

Others 5

1 Rupiah devalued; nominal exchange rate depreciated against US$.

2 Large projects rephased; government spending reduced; tax reforms initiated.

3 Interest & credit ceilings removed; new financial measures introduced; barriers to market entry removed; bank supervision; tight money policy.