Govt consults IMF, WB on capital control plan<\/p>\n
JAKARTA (JP): The government is consulting with the
\nInternational Monetary Fund (IMF) and the World Bank over plans
\nto implement a new system to monitor capital flows, according to
\nCoordinating Minister for Economy, Finance and Industry Ginandjar
\nKartasasmita.<\/p>\n
He said on Friday that the government needed to get the views
\nof various experts before implementing the new system so that it
\nwould be effective and meet the government's objectives.<\/p>\n
\"We are seeking the views of the IMF and the World Bank so
\nthat whatever we do will be truly effective,\" Ginandjar told
\nreporters.<\/p>\n
He added that Bank Indonesia's governor and the finance
\nminister were also discussing the plans with the international
\ncommunity in Washington.<\/p>\n
\"We're still studying various (models) used in other
\ncountries,\" he said.<\/p>\n
However, he reaffirmed that the government will not impose
\nstrict capital controls.<\/p>\n
Ginandjar explained that in principle, a freely floating
\nforeign exchange regime was the most appropriate for the country,
\nbut said that improving the monitoring and reporting of foreign
\nexchange flows was essential.<\/p>\n
Asked whether the country's exporters should surrender their
\nhard currency earnings, he said: \"We hope so.\"<\/p>\n
News that the government plans to introduce some form of
\ncapital controls reemerged earlier this week when Ginandjar was
\nquoted by a newspaper as saying that the government was
\nconsidering obliging exporters to report their hard currency
\nearnings to the authorities for monitoring purposes.<\/p>\n
Market players and analysts were convinced that this meant the
\ngovernment would make it obligatory for exporters to surrender
\nforeign exchange earnings to the central bank because a non-
\nobligatory approach would not be effective in strengthening and
\nstabilizing the rupiah.<\/p>\n
Analysts said that any rule forcing exporters to report or
\nsurrender hard currency earnings to the central bank could be
\ninterpreted as an undue control on the movement of capital.<\/p>\n
However, the news has helped to send the rupiah to
\nsignificantly higher levels against the U.S. dollar over the past
\ncouple of days.<\/p>\n
Separately, Bank Indonesia Governor Sjahril Sabirin said on
\nThursday in Washington that the introduction of a new currency
\nflow system would not take place this year.<\/p>\n
\"It is not coming out so quickly. We're not in a hurry. It's
\nunlikely within the year, but it could be next year,\" he told AFP
\nbefore winding up his visit to Washington for the IMF and World
\nBank's annual meeting.<\/p>\n
Finance Minister Bambang Subianto underscored the need for
\nboth developed and emerging economies to devise a new system to
\njointly monitor hedge fund operations.<\/p>\n
He was speaking at a press conference on Thursday, the last
\nday of the annual meeting.<\/p>\n
\"It should not be done by only recipient countries. It should
\nbe done on an international agreement,\" he said.<\/p>\n
\"A framework should be applied in many countries. This will be
\na control system in the recipient countries and the home
\ncountries of hedge funds,\" he said.<\/p>\n
The IMF's interim committee reached a broad consensus on the
\nneed to closely monitor operations of hedge funds as a result of
\nfears that short-term capital flows were capable of triggering a
\nglobal financial crisis.<\/p>\n
Bambang said Indonesia was ready to push follow-up discussions
\non the issue together with international institutions and
\ndeveloped nations, including the U.S. and Japan. (rei)<\/p>",
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"sponsor": "Okusi Associates",
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