The Role of the Fiscal Stimulus Program in Expanding Labor-Intensive Infrastructure in Response to the Impact of the 2008/09 Global Financial Crisis


ABSTRACT

The global financial crisis (GFC) that swept over the world in 2008/09 had an influence on the Indonesian economy. In an attempt to reduce the impact of the GFC, the government introduced a Fiscal Stimulus Program (FSP) in 2009 in order to encourage economic growth. The program consisted of two main elements, namely, tax cuts and increased government spending. This report presents the results of research into the implementation of the FSP, in terms of government spending to expand infrastructure in the context of reducing the impact of the crisis. The study, for which samples were selected in the kabupaten of Demak, Sragen, Sukoharjo, and Klaten (in Central Java) and the kabupaten of Gowa, Sinjai, and Bulukumba (in South Sulawesi), was part of the activities involved in monitoring the socioeconomic impact of the GFC, which has been carried out by the SMERU Research Institute since July 2009. This research was done in a qualitative way in order to obtain a general understanding of the impact of the GFC on the socioeconomic situation of the population, the process of formulation and decision-making in the implementation of the FSP, and the benefits of the FSP in overcoming the impact of the crisis on community livelihoods. On the whole, research findings indicated that FSP targets have not been in accordance with the impact of the GFC. Although the GFC had a sufficiently significant effect on the national economy during the period from the end of 2008 until the middle of 2009, its impact on the economies of the study areas was relatively minor. The allocation of FSP funding for kabupaten and kota shows a wide variation and was not related to the level of impact of the GFC or to the economic position of the region that had been impacted. The FSP funds had already raised the capacity of development spending in the recipient regions and the expansion of infrastructure provided benefits to the local economy; however, the FSP did not contribute directly to the assistance of community members who had been affected by the crisis.

Keywords: global financial crisis, fiscal stimulus program, infrastructure development


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