Exclusive, Chairman Of DK LPS Purbaya Yudhi Sadewa Confident Indonesia Will Not Enter A Recession If Economy Is Managed Properly

The world's economy is reported to be in turmoil and on the verge of recession. This situation could have an impact on the Indonesian economy. However, said the Chairman of the Board of Commissioners (DK) of the Deposit Insurance Corporation (LPS) Purbaya Yudhi Sadewa, if the Indonesian economy is managed well, he is optimistic that Indonesia will not enter a recession vortex.

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This optimistic statement is not without reason. According to Purbaya, as he is usually called, when the world economy slumped in 2008-2009, Indonesia was still able to grow 4.6 percent. When the world was hit by the COVID-19 pandemic in early 2020, Indonesia's economic recovery took place quickly.

Even in 2022 when the economy in several countries is experiencing negative growth, Indonesia's economic growth will show encouraging numbers. According to BPS (Central Statistics Agency) data, Indonesia's economy in 2022 will grow by 5.31 percent, higher than the achievements in 2021 which experienced growth of 3.70 percent. From the production side, the highest growth occurred in the Transportation and Warehousing Business Field at 19.87 percent.

Another argument, according to Purbaya Yudhi Sadewa, is that Indonesia's economy is relatively strong because it is supported by the domestic sector. "If the global economy is in turmoil, we will indeed be affected, but if we can manage the economy, it will not enter into a recession. The problem is that our economy is supported by 80 percent of the domestic sector. So if we can maintain domestic demand, I don't think our economy will be in trouble," he said.

LPS continued Purbaya took part in maintaining the economy by maintaining the banking sector. "We have explained to banking customers throughout Indonesia that their savings in banks are safe and guaranteed up to IDR 2 billion per customer per bank," he said.

What if the funds owned by the customer are more than IDR 2 billion? Don't be sad, there is a surefire trick revealed by Purbaya so that your savings can be safe. “If you have IDR 10 billion in cash, and it is stored in 6 different banks, as long as the amount is below IDR 2 billion per customer per bank, it is still safe. There are 105 commercial banks in Indonesia, so you can still save around 200 billion if you spread it across 100 existing banks," he told Iqbal Irsyad, Edy Suherli, and Savic Rabos from VOI who met him at the Jakarta LPS office recently. Here is the full excerpt.

LPS is an institution responsible for maintaining the stability of the banking system by providing guarantees for customer deposits at banks, has this been implemented?

So far, the LPS has carried out its duties properly. We have explained to banking customers throughout Indonesia that their savings in banks are safe and guaranteed up to IDR 2 billion per customer per bank. LPS is also active in the KSSK (Financial System Stability Committee) and participates in providing input to maintain financial system stability. So that the policies issued by the KSSK can maintain economic recovery.

During the 17 years that LPS has been operating, many banks have been rescued. We have liquidated 117 rural banks (Rural Banks) and 1 commercial bank. With this kind of performance, it is hoped that the public will have more trust in banking and not easily believe issues that are not clear and making them busy withdrawing their money.

At the beginning of 2020 there was a COVID-19 pandemic, what did LPS do at that time?

During 2020 when the COVID-19 pandemic hit and made our economy rather ugly and contracted. Under such circumstances, we don't see massive withdrawals of money from the public, because LPS is mobile and can assure the public that their money is safe. On the other hand, KSSK also did the same thing to maintain economic stability when the COVID-19 pandemic hit. So even in a pandemic, our banking sector can still be maintained.

How big is the public's trust in national banks at present, and what are the efforts made by LPS to increase public trust in national banks?

One of the measurements that can be used as a reference is during the last pandemic, people did not withdraw their money at the bank massively. That is, public trust in banking can still be maintained. The main key is socialization to the public that their money in the bank is guarded by the LPS and is safe. So if you have a hundred million or more in cash, don't keep it under your mattress, just put it in the bank because deposits of up to IDR 2 billion are guaranteed by the LPS.

LPS actively disseminates information through media interviews and disseminates information to various print and electronic media. Before I entered LPS, socialization through the media had not been intensified. Maybe at that time, we didn't realize how big the role of the media could be in socializing the programs at LPS to the public on a massive scale. Because it can help maintain banking stability as well. One way to make the public calm is to let them know that their money is safe in the bank.

So public literacy through the media is very important and very strategic?

It is very important, and that's why when I have working visits to Bandung, Surabaya, Yogyakarta, and other big cities I often invite the media to discuss the duties and roles of LPS. Maybe people say it's not very important, but that's the essence of what the LPS has to do. Continue to socialize so that the public is calm and knows that the money is being guarded.

So far, LPS has guaranteed customer deposits of up to IDR 2 billion per customer per bank, can this be increased? How about more funds than that?

There are three conditions for the IDR 2 billion guaranteed by LPS; noted, the interest rate is below the LPS guarantee and (you) don't bankrupt the bank. If in one bank a customer splits deposits into several accounts, they are still accumulated in the same account. If you have IDR 10 billion in cash, and it is stored in 6 different banks, as long as the amount is below IDR 2 billion per account per bank, it is still safe. In Indonesia there are 105 commercial banks, so you can still save around 200 billion if you spread it across 100 existing banks. I'm still calm, because my money is still under IDR 2 billion, hehehe.

Every year LPS receives additional funds to handle banking of nearly IDR 20 trillion. Maybe for this year, it can be more than that number. LPS' total assets now reach IDR 183 trillion, by the end of 2023 it could reach IDR 200 trillion. So with as big assets as you can maintain the bank, so if there is one bank that is not healthy it can be dealt with immediately and it is hoped that it will not spread everywhere.

How to deal with failed banks, what efforts have been made by LPS so that people can be calm and have no influence on other banks?

In 2020, there were indeed banks that experienced liquidity problems. The need for money is not much, around IDR 2 to IDR 3 trillion is enough to maintain the stability of the bank. No party has yet wanted to lend money, while the LPS can't enter because the law doesn't allow it at that time. But with the new P2SK Law (Development and Strengthening of the Financial Sector) we can enter if there is a case like this. Can put money before the bank goes bankrupt. The bankruptcy of a bank can be anticipated with LPS intervention. It doesn't spread everywhere, and the bank's restructuring costs are relatively smaller. So with LPS assets and cooperation with KSSK and other financial institutions, we can protect Indonesian banking.

If a systemic bank fails, it will be saved in various ways, but if the LPS can intervene in the future, we can minimize the impact. So there are preventive steps that LPS can take.

Observers say there is a threat of a recession in 2023, President Jokowi also reminded the same thing about this, what is the role of LPS in this matter?

In my observation, maybe when conveying this, President Jokowi received information that was not yet clear. So if the global economy is in turmoil we will indeed be affected, but if we can manage the economy it will not enter into a recession. The problem is that our economy is supported by 80 percent of the domestic sector. So if we can maintain domestic demand, I don't think our economy will be in trouble.

How to maintain domestic demand?

This is done by maintaining people's purchasing power. So the government's budget is spent (buying local products) so that the economy moves, including by providing assistance to the poor (BLT). Then banking is made into a system that is supportive for growth. Also keeping the price of money from getting too high in the market, in this case, the bank's interest rate. So even if the central banks in foreign countries raise our interest rates too, but only 50 bases, just to show that we are in line with them, this will not kill the domestic economic sector.

With bank interest rates of around 4 percent, deposit rates don't go up. The automatic landing rate also did not increase significantly. This means that there is still room for our economy to grow. Because the domestic demand is maintained. So if bank interest is cheap, those who have money will not hesitate to spend their money. Conversely, if bank interest is high, people will love spending their money. Meanwhile, from the business actor's point of view, if bank interest is low, they still dare to borrow money at the bank because there is an estimated return, because bank interest is not too high. So LPS helps from that side. With a model like this, I believe our economy will be able to overcome threats.

Do you have any references for cases like this?

There were experiences in 2008 and 2009 when there were disruptions to the global economy, from America and spread everywhere. When economic growth in many countries is negative, we can still grow 4.6 percent. At that time Indonesia was admired by the world because it was able to maintain growth. So the experience and knowledge that we once applied at that time did not suddenly disappear, they can still be applied again at this time.

We learned a lot from the economic crisis in 1998, in 2008, and in 2015 we were able to survive and in 2020 when the economy was down due to the pandemic we were able to recover quickly. In my prediction, our economy will still grow in the 4 percent range. To be able to grow up to 5 percent is also possible, and at 6 percent it is also not impossible.

How to achieve the maximum economic growth rate?

The way to do this is that fiscal and monetary policies must run together to maintain our domestic growth. And I'm sure President Jokowi knows exactly what must be done to maintain economic growth going forward. So it is possible that the global economy will be chaotic, but that does not mean our economy will be destroyed. By learning from experience and existing knowledge we can determine our future destiny, so our destiny is in our own hands, not in the hands of others.

What is the synergy between LPS and other financial institutions in maintaining economic stability and growth?

Once every three months we coordinate with the KSSK for the leadership level, for the deputy level the meeting is once a month. If there is an important issue, it will be discussed and resolved within three months, but if it can be done sooner, why not. All policies, especially those that may harm the economy, are discussed.

Including when there are signs of a rush at a bank, for example, can this be detected early?

Yes, because this condition can already be seen from the situation at the bank itself. Usually, the rush is also influenced by unhealthy economic factors around it. We develop the potential to detect future economic developments. There used to be a leading economic index that could predict economic growth forecasts for the next six months, which was accurate. And now LPS will make a similar tool, to see future predictions.

Analysts say there is a threat of recession in 2023, how do you explain this situation so that the public is calm and can work properly?

The threat of an economic recession will always exist if we are stupid. The problem is if the policy is wrong, the economy will definitely fall. Our domestic economy is more than 80 percent, and dependence on imports is 20 percent. If we can keep it no problem. Look at 2008-2009, we were still able to grow 4.6 percent when the world economy was not doing well. Currently, the government's economic policies are also right, there is enough money in the (banking) system, and the growth is around 29 percent. That's what we call base money or money growth, this is a policy that isn't very strict even though BI raised interest rates. But there is still room to grow. We stimulate banks to issue credit and business actors can borrow money, so the economy can rotate. So our economic growth can grow even though there is pressure from global factors. So our economic growth will be like 2022 and then at a minimum and even higher if possible.

Although busy at the office, Purbaya Yudhi Sadewa still helps his children to learn 

Running a busy life in the office as a professional is a necessity for the Chairman of the Board of Commissioners (DK) of the Deposit Insurance Corporation (LPS) Purbaya Yudhi Sadewa. But family for him remains number one. In the midst of business, he set aside time to walk with his children and wife. Other times he also still teaches his children, who are in high school and in college, to study.

For the man who was born in Bogor, on July 7, 1964, it is okay to have a mountain of work in the various institutions and companies in which he is involved. But when you are together with your family, you will make the most of it.

“In the midst of my busy schedule, I refresh myself by traveling with my children and wife. My son likes to go to Mount Gede. If we have a long vacation, we usually go to Mount Bromo," said Purbaya who completed his bachelor's degree in Electrical Engineering at the Bandung Institute of Technology (ITB).

Purbaya continued to travel to tourist spots, he was the one driving the car. While walking he would chat with his children. This togetherness is really optimized by him to be able to build bonds with his children.

But in another language, Purbaya joked, that his children don't just like being driven by him when they go to tourist attractions. But his children will be happy when he sees his father struggling to drive a car. "They are happy when they see me having a hard time, hehehe," he said with a happy laugh.

Purbaya experienced hardships while traversing the journey. Everything will pay off after the holidays are over and he returns to his usual routine. While their children are the same way, they are returning to school and continuing their studies.

When the school and lecture period had started, it turned out that Purbaya still had another task to do while at home, namely teaching his children to study. "At home, I still teach my children who are in high school and college. Yes, if I have time, I teach them to study,” he admits.

Sport

To maintain fitness, Purbaya Yudhi Sadewa tries to do sports according to his preferences. While many executives are fond of golf, he admits that he has no talent for playing golf. “Want to play golf like those people, I can't. I'm not a rich man,” he reasoned.

So what sport does he do? It turned out that Purbaya, who obtained his Doctorate in Economics from Purdue University, Indiana, United States of America, chose badminton.

"Once a week I play badminton at the GBK Arena with journalist friends. If you want to play, come with me and my friends who usually cover the economy and LPS activities," he said inviting us to join in.

For him, sport is not only to burn sweat. Through sports with colleagues and journalist friends, he can maintain friendships and at the same time convey the messages of the institution he leads to journalists. And journalists will convey the same thing to readers and viewers wherever they are.

Purbaya did a good collaboration. As the saying goes, kill two birds with one stone.

Study

Before being entrusted by President Jokowi to occupy the position of Chairman of the Board of Commissioners (DK) at the Deposit Insurance Corporation (LPS) for the 2020-2025 period, he held various strategic positions and functions. Either directly related to his expertise in the economic field or his position as a commissioner in a state-owned company.

Among them was the Head of the Danareksa Research Institute, then became Expert Staff for the Coordinating Minister for the Economy Hatta Rajasa in the era of President SBY. Even though the regime changed, Purbaya's contribution is still needed. He was then entrusted with becoming Deputy Presidential Staff in 2015 when Luhut Binsar Pandjaitan was the Chief of Presidential Staff.

When Luhut Binsar Pandjaitan was assigned as Coordinating Minister for Maritime Affairs and Investment, Purbaya was also involved as Deputy for Maritime Sovereignty and Energy Coordination. He is in charge of discussing issues in the field of maritime sovereignty and energy.

Apart from that, another task that has been entrusted to Purbaya is as a commissioner of PT Inalum (Persero), which is the holding company for mining BUMN or MIND ID. This holding oversees PT Aneka Tambang Tbk. (ANTM), PT Timah Tbk. (TINS), PT Bukit Asam Tbk. (PTBA), and PT Freeport Indonesia.

To reach what he has now, he passed it through with great difficulty. Because of that, he advised young people to never stop learning. "My advice for young people is don't forget about school. School is important. My son is too fond of playing crypto, he wins a lot, and he wants to forget about school," he said.

Furthermore, said Purbaya, he must be adaptive to the ever-evolving technology. “You have to be open to the latest technological developments. And if you like something, you have to be serious, really learn the knowledge. For example in the financial sector, study it thoroughly. If you don't have the knowledge, you will definitely go bankrupt," he said.

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And what should not be forgotten is to apply the knowledge that has been achieved. "So keep the spirit to learn. Don't forget that when you are smart, come back to Indonesia to apply your knowledge. So there's no need to live and settle abroad," said Purbaya Yudhi Sadewa, ending the conversation.

"We learned a lot from the economic crisis in 1998, in 2008, in 2015 we were able to survive and in 2020 when the economy slumped due to the pandemic, we can recover quickly. In my prediction, in bad cases, our economy will still be able to grow in the range of 4 percent. But to be able to grow up to 5 percent is possible, and at 6 percent is also not impossible,"