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Indonesia's changing economy hurts daily costs
Producers of tofu and tempeh, a staple Indonesian dish, across Indonesia recently ended their three-day strike over the rising price of soybean, an act which had an immediate effect on everyday life in Indonesia.

Indonesia correspondent Helen Brown reports.


Central banks are not having an easy time, with many economies around the world struggling to maintain growth and jobs.

In recent days, Indonesia's Central Bank has finally done what many analysts had already foreshadowed, downgrading the country's the growth forecast to less than 6 per cent.

Indonesia, for so many years a stellar performer, is now feeling the pain of a trade balance that's slipped into the red, rising inflation and a weakening currency.

Indonesia correspondent Helen Brown reports from Jakarta.
Transcript
HELEN BROWN, REPORTER: It's one of Indonesia's most popular foods, squares of tofu and soybean cakes called tempeh are eaten by millions every day. But lately customers have noticed that prices are going up, or the portions are getting smaller.

RESTAURANT CUSTOMER (translation): It used to be 2,000 for three pieces, now 1,000 for a piece.

HELEN BROWN: In recent days the supply of tempeh and tofu ran out.

The producers went on strike, because it was costing them too much to buy the soybeans to make the dish.

SHOP OWNER (translation): So the soybean price is expensive. No production for three days, no tofu, no tempeh. I didn't open my shop. I felt uncomfortable selling food without tempeh and tofu.

(Footage of soybean processing factory)

HELEN BROWN: It is in tens of thousands of small places like this that soybeans are processed and made ready for market. But the issue of tofu is symptomatic of the new economic reality Indonesia finds itself in.

Indonesians consume more than 2 million tonnes of soybean a year, but rely on imports to feed their appetites. And as international prices go up, the cost to these home style industries has become unaffordable.

CISYANO, TOFU AND SOYBEAN CAKE PRODUCER ASSOCATION (translation): If we open today, we wouldn't make ends meet for today, that's why we are doing this strike for the government to see because the people's representatives are asleep. If this keeps on going, people wouldn't care because the government doesn't care.

HELEN BROWN: Not long ago, it used to cost around 75 cents a kilogram for soybeans, now it's almost $1.

The real crunch came with the weakening of Indonesia's currency, the rupiah, which has been hit by sudden and fast falls. It's now stabilised a bit, but had devalued by around 16 per cent. And that weaker currency is making imports more expensive to buy.

But Indonesia's financial woes are not unique. It's one of several emerging economies hit by a move of foreign capital out of the country as the United States market starts to look a bit more promising.

This is compounded by investors nervously eyeing Indonesia's large current account deficit. But on the street, those concepts are little understood.

Raising the price of a basic food by around 10 cents may not seem like much, but for those on lower salaries it quickly adds up. And that's the challenge for Indonesia - a large economy, a member of the G20, but still home to tens of millions whose salaries are low and jobs are precarious.

JOHN KURTZ, AT KEARNEY MANAGMENET AND CONSULTANCY: It's a G20 country, it's a substantial force on the global stage. It's the key force in ASEAN (Association of South East Asian Nations) both from an economic size and political sort of positioning standpoint and yet vast portions of its populous are still relatively impoverished, and so it's very sensitive to the swings of the global economy.

HELEN BROWN: Now the government is stepping in with some new measures. Trade officials are implementing a scheme that requires importers to buy a certain amount of the local soybean crop at a set price. There is also a ceiling on how much tofu and Tempeh producers pay for their raw material.

Officials say steps like these will stop the price from fluctuating, a key concern for small buyers.

CISYANO (translation): I am confused. If we open, we don't get profit. If we don't open, we suffer. The only hope is that the soybean price becomes standard and doesn't fluctuate.

HELEN BROWN: This kind of government intervention has been seen before when an economy is faced with a slowdown.

JOHN KURTZ: We see that in the form of the trade ministry trying to balance between protectionist policies that appeal on the one hand to part of the electorate and the very real risk that price inflation will result, as a result of narrowing of the supply chain.

HELEN BROWN: What seems likely is that it's going to be an uncomfortable shift for a country which had been riding high; an emerging market darling which felt assured of its path. Indonesia's tofu and tempeh producers are threatening to go on strike if the situation doesn't improve.

And the cook, who's been in the business for 30 years, will continue serving smaller portions until things look up.
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