JAKARTA - The weakening of the rupiah exchange rate is not\nnecessarily beneficial for the national manufacturing industry because\nmost of the industrial raw material needs in Indonesia still depend on\nimports.<\/p>\n
Head of Permata Bank Economist Josua Pardede, said in general, the\nweakening of the rupiah has the potential to put pressure on the\nmanufacturing sector.<\/p>\n
He added that this condition could trigger an increase in production\ncosts due to import inflation, which ultimately drives up the price of\ngoods and increases domestic inflation.<\/p>\n
Josua assessed that the assumption that the weakening of the rupiah\nwould benefit the economy through increased exports was not entirely\ncorrect, especially if you look at the current structure of Indonesia\u2019s\nmanufacturing industry.<\/p>\n
\u201cIf we talk about the manufacturing industry which must first import\nraw materials, this will definitely be burdensome,\u201d he said in a\nJournalist Training in Makassar, quoted on Sunday, May 24.<\/p>\n
According to him, the weakening of the rupiah can indeed provide\nbenefits for commodity exporters because income in US dollars becomes\nlarger when converted into rupiah. However, this condition does not\napply to the majority of manufacturing industries which still require\nraw materials and auxiliary goods from abroad.<\/p>\n
He added that as a result, when the rupiah exchange rate against the\nUS dollar weakens, the cost of importing raw materials increases and can\nsuppress the profit margins of manufacturing companies.<\/p>\n
Josua also highlighted that most of the raw material imports in\nIndonesia are used to meet domestic market needs, not entirely for\nexport products, so that the depreciation of the rupiah actually risks\nincreasing production costs and prices of goods in the country.<\/p>\n
\u201cThe statement that Indonesia benefits from the weakness of the\nrupiah is misleading if we look at the structure of our economy,\u201d he\nsaid.<\/p>\n
He emphasized that the view that Indonesia is automatically\nbenefiting from the weakening of the rupiah is not in line with the\ncurrent conditions of the national economic structure.<\/p>\n
In addition, Josua said the business world needs exchange rate\nstability rather than a too weak or too strong rupiah, and stability is\nconsidered important so that business actors can make business planning,\nincluding the procurement of imported raw materials, more certain.<\/p>\n
Business actors, continued Josua, need certainty in calculating\nimport needs for the next three to six months so that cost planning can\nbe carried out more accurately.<\/p>\n
He also emphasized that the main task of Bank Indonesia is not to\ndetermine the rupiah at a certain level, but to maintain exchange rate\nstability so that volatility does not disrupt economic activity and the\nnational investment climate.<\/p>\n
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