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Jakarta Post

Low saving leads to heavy reliance on foreign capital: Economic chief

  • News Desk

    The Jakarta Post

Jakarta   /   Fri, August 3, 2018   /   11:03 am
Low saving leads to heavy reliance on foreign capital: Economic chief Coordinating Economic Minister Darmin Nasution. (JP/Anton Hermansyah)

Coordinating Economic Minister Darmin Nasution has warned that Indonesia relied very much on foreign capital because of the low savings rate among Indonesians. He considered it to be a factor of a weak fundamental economy.

The minister said foreign capital entered Indonesia through portfolio investment such as stocks and government debt papers.

Darmin explained about 45 to 50 percent of shares in the stock market in the country were owned by foreign investors, compared to the situation in Malaysia and Thailand in which, foreign investors only control about 12 to 14 percent of the stocks.

He said low saving in Indonesia was not caused by corruption and overspending among the Indonesian people, but because not all foreign exchange obtained by Indonesians through export and other businesses was taken home by the exporters.

He said about 80 percent of foreign exchange from export was taken home to Indonesia.

“We call it an economic leakage in economics terms,” he said as quoted by kompas.com, when speaking at a “Business Lunch with Jusuf Kalla” event in Jakarta on Thursday.

He further explained that from 80 percent of funds that were taken home, only about 15 percent were exchanged into rupiah, while the remaining funds were deposited in United States dollars.

He said such practices did not violate any regulations in Indonesia, but it negatively affected the country’s economy. (bbn)