Forex policy not merely for exports<\/p>\n
JAKARTA (JP): Bank Indonesia Governor J. Soedradjad
\nDjiwandono said yesterday that the central bank would not pursue
\na foreign exchange policy to merely boost exports.<\/p>\n
Soedradjad said that allowing the rupiah to depreciate faster
\nagainst the U.S. dollar was not the only way to improve the
\ncompetitiveness of the country's exports. He said the rupiah
\nexchange rate would be managed so the value of the currency would
\nneither be too high nor too low.<\/p>\n
"We want to be as realistic as possible but we also don't want
\nto be blamed by exporters," he told approximately 900 executives
\nand financial analysts at a seminar on Indonesia's capital market
\ndevelopment.<\/p>\n
The central bank governor agreed that allowing the rupiah to
\ndepreciate faster against the dollar was one of the government's
\npolicies to stimulate exports.<\/p>\n
However, he said, the monetary authority would not sacrifice
\nmarket principles only to ensure that exports were on right
\ntrack.<\/p>\n
"If we allow the rupiah to depreciate much faster, while there
\nis a glut of dollars in the market, you will all laugh at us
\nbecause such a kind of policy is against the market mechanism,"
\nhe said when asked if he shared Minister of Finance Mar'ie
\nMuhammad's view that the rupiah had been slightly overvalued.<\/p>\n
Mar'ie, who officially opened yesterday's conference, said in
\nhis address that he thought the rupiah had of been slightly
\novervalued lately and that the currency should be depreciated
\nfaster against the American greenback to improve the
\ncompetitiveness of the country's exports.<\/p>\n
The central bank governor said he would not comment on
\nMar'ie's observations, but he said that over the past three years
\nthe central bank had done exactly what the minister of finance
\nhad said.<\/p>\n
According to the central bank governor, the rupiah depreciated
\n3.2 percent against the U.S. dollar in 1993, 4 percent in 1994
\nand 4.5 percent in 1995 in line with the government's policy to
\nstimulate exports. In the January to July period this year, the
\nrupiah depreciated nearly two percent, less than a half of the
\ngovernment's 5 percent target for the year.<\/p>\n
"Depreciation as a way to improve the competitiveness of
\nexports is valid and justified," he said. "Such a policy is to
\nsupplement the export drive. Exports should not, therefore rely
\nmainly on the exchange rates."<\/p>\n
The central bank acknowledged that on a daily basis, the
\nrupiah was often too strong. But he warned that exporters should
\nnot base their judgments on short-term performances because the
\ncountry's monetary policy was based on a long-term prospects.<\/p>\n
"The exporters should be blamed if they make judgments on a
\ndaily basis because we are talking about prospects and the
\nassessments should be at least on a medium-term basis," he said.<\/p>\n
Soedradjad said other countries' experience told us that the
\ndepreciation of their currencies did not help them promote their
\nexports.<\/p>\n
He said the U.S. dollar had depreciated against the Japanese
\nyen much faster in the last two years but it did not really help
\nU.S. exports.<\/p>\n
On Thailand's experience the governor said: "Thailand has
\nhardly changed its currency rate over the last several years. But
\nwho can argue with me that Thai products are not competitive."<\/p>\n
He said the current policy to depreciate the rupiah against
\nthe dollar at the previous annual rates of 4 percent to 5 percent
\nwas not sufficient to stimulate exports.<\/p>\n
The central bank has a much better mechanism at present in
\nmanaging the rate of the rupiah against the dollar. In the past,
\nthe rupiah rate was set every day at eight o'clock in the morning
\nbased on a basket of major foreign currencies, he said.<\/p>\n
"Now the central bank can change the rate any time when it
\nfeels necessary. It could be changed in hours," he said. "At
\npresent, we don't change it if we don't have to change it. We
\nwill change it if we have to change it."<\/p>\n
Participants at the seminar asked the central bank governor
\nabout the government's policies on curbing the country's widening
\ncurrent account deficit.<\/p>\n
Soedradjad said that raising export earnings remained the
\nfirst priority, followed by wooing more direct investment and
\nportfolio capital.<\/p>\n
He said the exports would be bolstered through a more
\nefficient manufacturing sector.<\/p>\n
He confirmed that the central bank's move last month to float
\nbonds on the New York Stock Exchange was mainly aimed at setting
\na benchmark for Indonesian private borrowings, which have often
\nhad higher interest rates than those raised by private companies
\nfrom other developing countries. (hen)<\/p>\n
Stability -- Page 11<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/forex-policy-not-merely-for-exports-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }