The government and central bank on Tuesday unveiled a series of measures to bolster foreign exchange reserves and market confidence as the rupiah hit a seven-year low of Rp11,900 against the US dollar, The Jakarta Post reported.
New policies to bolster reserves are:
* State-owned enterprises must place foreign currency reserves in domestic banks and regularly report foreign currency needs
* Acceleration of dollar-funded development projects
* State firms must not move funds among banks for higher gain
* Government and BI to buy back government bonds (SUN)
* If needed, exercise currency swap agreements
* Make state budget more adaptable to changes
* Prevent illegal imports by limiting imports of garments, electronics, food and beverages, toys, shoes
* Eliminate export duty on CPO and provide LCs
* Set up inter-ministerial team to monitor flow of goods
Finance Minister Sri Mulyani Indrawati said, if needed, the government might draw on currency-swap agreements with central banks in China, Japan and South Korea.
Treasury Director General Rahmat Waluyanto added that the ministry is likely to buy back rupiah government bonds on Thursday as part of the measures.
The measures helped restore confidence, and with an improved mood in regional markets, the Indonesia Stock Exchange’s composite Index rose to close the week at 1256.704.
The upswing was also influenced by the exchange’s move to raise from 10% to 20% the maximum amount a stock can gain per day. The downward limit was maintained at 10%.
"Foreign funds dominated the trade as downside risk now is likely lower and more manageable," a trader with Trimegah Securities told Dow Jones Newswires.
At the close of business on Friday, the rupiah was trading at 11,000 to the dollar, down from 10,800 the previous day.
The rupiah had rebounded from a seven-and-a-half-year low on Tuesday after President Susilo Bambang Yudhoyono told reporters that the government was preparing the policies intended to help the rupiah, hit by a retreat of foreign investors amid the global financial crisis.
Yudhoyono's pledge helped the currency cut its losses even before details of the support package were released.
An economist with PT Bank Central Asia David E. Sumual said the rupiah gains were in line with a region-wide reversal of the trend against the dollar.
On Thursday, the Finance Ministry bought back Rp41 billion ($3.89 million) worth of government bonds (SUN) via an auction as part of the measures to stabilize debt prices.
Treasury Director General Waluyanto said the ministry received a total of Rp1.25 trillion worth of selling offers from bondholders, Reuters reported.
The government had said on Monday it was ready to carry out its share buy-back program at the IDX through the Government Investment Center (PIP), Antara reported.
"The funds available at the PIP amount to Rp4 trillion, of which Rp2.5 trillion is managed by the PIP itself while the remaining Rp1.5 trillion is managed by asset management company PT Perusahaan Pengelolaan Aset," said Said Didu, secretary at the Ministry for National Development and Planning.
The funds with PPI are reserve funds for infrastructure development, he added.
PIP director Langgeng Subur said PIP had appointed security firm PT Danareksa as a buy-back broker for state-owned enterprises, Kontan reported.
Decree inked to help firms avoid mass layoffs
A joint ministerial decree limiting wage rises is expected to help labor-intensive manufacturing companies weather the impact of the global economic slowdown and prevent massive layoffs, stakeholders say, The Jakarta Post reported.
Chairman of the Indonesian Employers Association (Apindo) Sofjan Wanandi said the decree was expected to discourage local administrations from raising regional minimum wages beyond the capabilities of manufacturing firms.
"We are hoping local administrations can help the manufacturing firms cope with the global economic slowdown by not issuing policies that may burden the sector," he said.
Manpower and Transmigration Minister Erman Suparno, Trade Minister Mari Pangestu, Industry Minister Fahmi Idris and Home Affairs Minister Mardiyanto on Friday inked the joint decree, which also stipulates other efforts designed to empower the local economy against fallout from the global crisis.
Idris said the decree would not forbid wage increases agreed during negotiations between companies and workers.
Existing regulations emphasize the role of local administrations in determining adjustments to the minimum wage, meaning companies are not at liberty to set the mark based on their financial capabilities.
Wanandi said the new decree had been prompted by fears raised by business communities that certain local administrations were planning to increase minimum wages by up to 30%.
"It would be best if companies could directly negotiate with workers to set the wage because not all companies have similar performances. In a booming sector, I believe they could pay the workers more," he said.