Eight major issues seen influencing rupiah rate<\/p>\n
JAKARTA (JP): The chief executive officer of Standard
\nChartered Bank in Indonesia, Raymond Ferguson, said here on
\nTuesday the country would have to live with a volatile rupiah at
\nleast for the short term.<\/p>\n
\"I think there are at least eight major issues that will
\ninfluence the movement of the rupiah rate,\" Ferguson said during
\na seminar on Indonesia's economic recovery.<\/p>\n
He cited the performance, and consequently the credibility,
\nof the new Cabinet as crucial in determining the rupiah's rate.<\/p>\n
The new Cabinet clearly shows President Abdurrahman Wahid
\nremains the boss, but the market will watch to see Vice President
\nMegawati Soekarnoputri's solidarity with the Cabinet, he added.<\/p>\n
\"The market is also watching to see as to whether the Cabinet
\nis a group of individuals or is a working team,\" Ferguson said.<\/p>\n
He acknowledged the immediate negative market reaction to the
\nnew Cabinet lineup created unwanted pressure.<\/p>\n
How the public reacts to the planned increase in domestic fuel
\nprices in October is also a sensitive issue that factors into the
\nmarket's perception of the rupiah, according to Ferguson.<\/p>\n
He recalled how a rise in fuel prices in April 1998 sparked
\nthe instability that contributed to the fall of then president
\nSoeharto in May of that year.<\/p>\n
Ferguson added that the speed with which the Indonesian Bank
\nRestructuring Agency (IBRA) disposed of the assets under its
\nmanagement, and the impact of the decentralization of political
\nand fiscal power to the provincial and district administrations
\nwere other issues likely to influence market sentiment regarding
\nthe rupiah.<\/p>\n
Standard Chartered's bid to buy part of Bank Bali last year
\nfailed after opposition from bank employees, and the announcement
\nthat an independent audit had uncovered a scam in the
\ndisbursement of the bank's claims on other banks under the
\nmanagement of IBRA.<\/p>\n
Ferguson said legal enforcement in cases of nationalist
\nobjections blocking the sale of assets to foreigners and
\nbankruptcy proceedings at the Commercial Court was another factor
\nwhich could influence the market.<\/p>\n
The other factors monitored by the market include the progress
\nof the bank restructuring program, the pace and consistency in
\nwhich reform policies are executed and middle-class consumer
\nconfidence, Ferguson said.<\/p>\n
\"Consumer confidence is quite important right now, especially
\nsince government spending is severely restrained,\" he added.<\/p>\n
IMF's senior representative in Indonesia, John Dodsworth,
\nspeaking at the same conference, raised concern over deep cuts in
\nthe government's capital spending, warning of its impact on the
\nquality of basic infrastructure.<\/p>\n
\"I think there are limits to these cuts, given their impact on
\nthe development and maintenance of infrastructures,\" Dodsworth
\nsaid.<\/p>\n
The World Bank's country director for Indonesia, Mark Baird,
\nexpressed similar concern over the too cautious spending policy
\nof the government.<\/p>\n
Baird estimated the actual budget deficit in the current
\nfiscal year (April to December 2000) could range from 1 percent
\nto 2 percent of gross domestic product, compared to the estimated
\n5 percent to 6 percent.<\/p>\n
The lower than estimated deficit should obviously be
\nattributed partly to much higher than expected oil prices, he
\nsaid.<\/p>\n
\"But too cautious spending in the public sector also plays its
\npart,\" Baird added. (bkm\/vin)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/eight-major-issues-seen-influencing-rupiah-rate-1447893297",
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"sponsor_url": "https:\/\/okusiassociates.com"
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