By Aditya Suharmoko

The government says the possible failure of the US bailout bill may not pose a threat to Indonesia's economic fundamentals, despite global fears that the United States, the world's largest economy, may plunge into grave recession.

Strong banking performance, robust commodity exports and less developed capital market products were cited as key reasons for optimism in keeping the country's economic pillars sturdier than during the 1997 Asian financial crisis.

"It's impossible that the world does not need our commodities," Kalla said Wednesday as quoted by Antara.

"Regardless of the degree of the crisis in the US, the world still needs oil, coal, textiles and palm oil."

He added he believed China could be affected more severely because of its reliance on the export of manufacturing products, for which demand is likely to decline due to lower purchasing power in the US and Europe.

Non-oil and gas exports surged to US$54.38 billion in the first half of 2008, a year-on-year increase of 23.2 per cent, thanks to higher worldwide commodity prices, data from the Central Statistics Agency (BPS) shows.

These exports made up 77.19 per cent of Indonesia's $70.45 billion of total exports.

Southeast Asia's biggest economy is also a major exporter of tin, cocoa, coffee, nickel, copper, gold, rubber and vanilla.

On Thursday, the US Senate approved a $700 billion financial bailout bill, hoping to ease a deepening credit freeze and volatility on global stock markets spawned by the crisis on Wall Street, AFP reports.

However, the decision to pass the bill remains with the House of Representatives, which on Monday rejected the bill.

Indonesian finance minister Sri Mulyani Indrawati echoed Kalla's optimism, saying the country's banking sector was in a healthier state than it was prior to the Asian financial crisis.

"Economic growth, as well as monetary and banking stability are relatively stronger since our recovery (from the crisis)," she said.

Key indicators in the domestic banking sector reflect this outstanding performance.

As of the first half of this year, accumulated gross nonperforming loans (NPL) of domestic banks stood at 4.1 per cent, or around Rp 48.6 trillion ($5.28 billion), compared to 4.6 per cent at the end of last year.

The central bank requires an NPL for banks of below 5 per cent.

The capital adequacy ratio (CAR) of local banks stands at 16.4 per cent as of June, much higher than the minimum limit of 8 per cent. CAR is the capacity of a bank in terms of meeting liabilities and risks, such as credit and operational risks.

Raden Pardede, chairman of the Indonesian Financial System Stability Forum, said the financial turmoil would not extend far into the Indonesian financial system because of the relative unavailability of complicated securities products in Indonesia.

"Derivative products packaged similar to the US subprime mortgages, now known as toxic assets, are not that developed here. We are grateful our financial institutions were not lured into issuing such products," he said.