Indonesia economy: Ain't no sunshine!

The economy expects a boost from Central Bank's decision to cut its benchmark rate by 50 basis point at the time Jakarta awarded third winner as the most polluted city in the world, many parts of Sumatra Island suffer regular power cut and haze, Lapindo disaster to cost US$3 billion, increasing number of avian flu death toll, widening oil deficit, and minimum progress in cutting the hefty bureaucrazy & infrastructure costs.

We have to wait few more months to see whether the banks and other domestic financial institutions would cut lending rates. And even if so, there is no guarantee that lending would increase and subsequently drive the economic growth. It is true that high interest rate has been halted some investment projects and cut significantly business margins (the bottom line), but expecting the growth merely on rate cut is a mistake.
Some argues that BI should cut further its benchmark rate to at least 10% to boost lending. But even an interest rate below 10% wouldn't help as we have experienced before. If we look at first half financial report of listed companies, most of them recorded lower operating profit (before interest expenses). While most of these companies recorded higher sales, their costs (direct & operating) increased even higher, reflecting a worsening efficiency. Why?
The country needs to seriously tackle more fundamental issues such as bureaucracy and hidden (under the table) costs. Investment Coordinating Board (BKPM) recently claimed that it had cut the time-frame needed to get the license from three months average to less than a month. But investors need hundreds of papers/licenses on top of the investment license such as land acquisition etc that could take months if not years to get.
Infrastructure costs are clearly high on a scarcity of supply. Electricity, for example, is expensive not because of its tariff but mainly on its reliability and security of supply. If you happen to be in Sumatra, almost all big cities are suffering power cuts. I visited the island over the weekend and stay in some big cities for few nights and experienced the electricity problem.
Telecommunication costs are also considered among the highest in South East Asia simply because we half-heartedly promote competition in the sector and maintain the incumbent player's profitability in the name of higher dividend to stakeholders (especially the MSOE's dividend target for the state budget). Transportation costs, seaport handling charges already the highest in Asia. Congesty in the city add the transportation costs as well simply because we've been too slow in providing mass rapid transport system.
Legal certainty is also expensive and getting more complicated due to overlapping authority between central and regional administrations over the autonomy issue.
We spend too much time discussing macro-economy, in fact we have too many experts in the field, but we are careless on the micro-economy.

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