Crisis and opportunities

It has been said that a crisis has two faces: It is a painful process and that necessitates costly damage control, and at the same time it presents opportunities to reform systems, change rules, improve governance, and serve the market and its players to the betterment of the overall economic playing field. The global financial crisis is clearly affecting Indonesia, and will likely continue to affect Indonesia for some time to come, though no one can be sure for exactly how long. Indonesia's open capital market and financial market regime makes it vulnerable to shocks in Wall Street, London, Tokyo, Hong Kong, and Singapore – commerce hubs to which, or from where, the Indonesian business sector players channels their funds. Shortly after panic rushed the global financial centers, the capital market index of the Indonesian Stock Exchange plunged to one of the worst in the world, and the Rupiah has since depreciated against US Dollar to exceed the psychological barrier of Rp 10,000.00.

Compared to the monetary and financial crisis that paralyzed Indonesia in 1997-1998 and the years thereafter, the present financial crisis may seem to be affecting only the Indonesian big business. This would be a misleading assumption to make on initial appearances. Big, medium and small businesses world-wide have been affected severely. This will inevitably impact commercial transactions around the world in terms of funding capability and demand for goods and services; Indonesia is no exception. To make matters worse, more bad news is coming, as demand for energy increases while agriculture exports (mainly CPO) are declining. Large companies that have used the capital market instrument to transact their shares are currently feeling the brunt of the crisis, and some are in danger of losing control of their own corporate kingdoms. What we have been reading in the media for the last 3 weeks is very interesting, especially in the context of the Indonesian general election, which will occur next year in. Issues of power, politics, money, governance, ethics and interests have become ingredients in a chaotic mix. The crisis will see no winner come out of it; even in the grand scheme of things, no solace can come out of a systemic and global failure in governance.

One possible consolation for Indonesia is that because we survived the painful multidimensional crisis in 1997-1998, we have become much better prepared this time around. The experience of the previous crisis have taught us how to build better infrastructures in terms of institutions and human resources, despite various setbacks that are largely political in nature that arose during the transitional governments. This experience can be used to give us the ability to: (a) be more resilient in enduring the pain, (b) cooperate with the government in establishing priority areas for support, (c) effectuate the already-proven crisis management systems, (d) renegotiate deals that have became sour, (e) agree on the agenda that all efforts should go first to save the economy, and (f) prepare for the worst, including being prepared to cut loss in certain sectors and use the  legal process of bankruptcy as a last resort.

The Indonesian legal industry will once again be called to give its contribution to elements in government, the business sector, as well as the general public, in order to assist these elements in facing the problems that well up from the crisis. Practitioners will also be needed: to give guidance in establishing new public policy with the highest levels of governance, to sit beside the parties at negotiation tables, and to defend parties at court or in arbitration rooms. Once again, the legal industry will be needed to show not only their professionalism and deepest understanding on the issues, but also to show their decisive support of the best interests of the country above any other interests.

November 2008