Developing countries including Indonesia in 2010 got flooding of Foreign Capital inflow not to Direct Investment but buy SBI and SUN. SBI is Sertifikat Bank Indonesia and SUN is Surat Utang Negara (Goverment Bond). SBI issued by Central Bank, Bank Indonesia and SUN issued by the Goverment.
Total foreign funds invest in SBI reach Rp.72,58 trilions or 32,25 % of total SBI value. Similar happened in SUN, reach Rp. 190,2 trilions or 30,12% of total SUN value. If foreign investor withdraw in the same time, we may imagine what would happend...econpmic crisis.
Both instruments are very secure, since back up by the Goverment that will never be bankcrupt with a relatively high rate of interest comparing to USA, Europe and Japan. In USA the rate almost drop down to ZERO. Europe face downturn in economic growth and run austerity program. That is why the funds flowing to the developing countries, including Asia.
Some countries set a policy to anticipated the negative impact of the Capital inflow. Thailand taxed interest of Foreign who buy Goverment Bond. Latin America country took a similar plicy as well. China who set Yuan rate in steady rate but the inflation rise in Properties and commodities prices. Malaysia Rinngit appreciated 10 % in 2010.
1. Accumulate Foreidn exghance reserve
2. Set a minimum one month tenor of SBI
3. Switch SBI to Cerificate of Deposit
RecentlyCentral Bank felt confidence with a huge sun of reserve amount US$ 98,7 as a high increasing of industrial products export. The grafic value of export kept constant due to selected kinds of export commodities and selected destination countries as well. Up until October total export reach a very high US$.98,7 million, almost touch 100 million. In August 2010 itself reach US$ 13, 31 million, more than 38% higher than the sama month last yeaar.
Do you believe it.....A lot of technocrat in Central Bank, in Goverment office never think out of Boxes...If something bad happened, they will keep quite and hand off the responsibility. It was happened when economic crisis hit Asia and Indonesia as well.
Hopefully, the economic crisis 2007 never happend again and again as a cosequences of flooding Capital inflow and suddenly withdraw and out of the country.
Central Bank, Bank Indonesia head office