Fixed exchange rate system still an option: PDI-P<\/p>\n
JAKARTA (JP): Indonesia may have to reemploy a fixed exchange
\nrate system if its currency continues to be treated \"unfairly\",
\naccording to a legislator of the Indonesian Democratic Party of
\nStruggle (PDI Perjuangan).<\/p>\n
Theo F. Teomeon, who is also a currency expert, said on the
\nweekend that such a measure would be an option if creating a new
\ncredible government and upholding the supremacy of the law fail
\nto strengthen the rupiah.<\/p>\n
\"If we continue to receive unfair treatment, sooner or latter
\nthat (implementing a fixed exchange rate system) would have to be
\nconsidered,\" Theo told reporters on the sidelines of the second
\nday of the General Session of the People's Consultative Assembly
\n(MPR), the country's highest legislative body, which is set to
\nelect the next president on Oct. 20.<\/p>\n
PDI Perjuangan Chairwoman Megawati Sukarnoputri is the most
\npopular presidential candidate.<\/p>\n
Theo did not explain what he meant by unfair.<\/p>\n
The country has been devastated by the current economic
\ncrisis, which began in August 1997 when the rupiah collapsed
\nafter the government abandoned its managed float system and
\nallowed the rupiah to move in a free-float system.<\/p>\n
International speculators have also been partly blamed for the
\ncollapse in the region's currencies, which started with the baht
\nin Thailand.<\/p>\n
The rupiah tumbled to more than Rp 17,000 to the U.S. dollar
\nin January compared to around Rp 2,450 before the crisis began.
\nFormer president Soeharto stepped down in May 1998 amid a
\ndeepening economic crisis.<\/p>\n
After strengthening to around Rp 6,500 per dollar a couple of
\nmonths ago, it tumbled again, to around Rp 8,400 in the wake of
\nPresident B.J. Habibie's \"misguided\" policy on East Timor, and
\nthe Bank Bali scandal, which implicated his inner circle.<\/p>\n
But Theo is confident that creating a new credible government
\nwould restore confidence in the country, which will, in turn,
\nstrengthen the rupiah.<\/p>\n
\"So it's too early to tell (whether a Megawati-led government
\nwould employ the fixed exchange rate system),\" he said.<\/p>\n
\"We still have to give the new government a chance to talk
\nwith the international lenders (IMF),\" he added.<\/p>\n
The International Monetary Fund (IMF), which is organizing a
\nUS$46 billion bailout fund for the country, has said that it was
\nnot the right time yet for Indonesia to return to the fixed
\nexchange rate system.<\/p>\n
The country employed such a system in the late 1960s and early
\n1970s.<\/p>\n
It was Kwik Kian Gie, Megawati's top economic adviser, who
\nfirst raised in April the possibility of Indonesia returning to
\nthe fixed exchange rate system to help strengthen the rupiah to
\nthe Rp 5,000 level.<\/p>\n
Kwik said that the country's crippled business sector could
\nrepay its overseas debts and resume production only if the rupiah
\nstrengthened to the Rp 5,000 level, especially because the
\nmanufacturing industry relied heavily on imported raw materials.<\/p>\n
Kwik said at the time that his party would endeavor to
\nreintroduce the fixed exchange rate system if it won the general
\nelection, but added it would first seek international support for
\nsuch a drastic move.<\/p>\n
He explained that the support of the international community
\nwas essential because the country would need more than $20
\nbillion in foreign loans to bolster its foreign exchange reserves
\nin order to make the system credible.<\/p>\n
Former president Soeharto had been tempted to reintroduce a
\nfixed exchange rate system under the currency board system, but
\nwas strongly opposed by the IMF.<\/p>\n
However, reintroducing the fixed exchange rate system is now
\nappealing, particularly to many Indonesian businesspeople as they
\nenvy their Malaysian counterparts who do not have to spend a lot
\nof time and energy negotiating with foreigners for asset sale to
\nrepay debts after the country employed a currency control.<\/p>\n
IMF officials have quietly applauded Malaysia's system. (rei)<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/fixed-exchange-rate-system-still-an-option-pdi-p-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }