Govt mulls capital control to protect rupiah<\/p>\n
JAKARTA (JP): Minister of Industry and Trade Luhut Pandjaitan
\nconfirmed on Friday that the government was studying the
\npossibility of imposing capital control to arrest the falling
\nrupiah.<\/p>\n
\"Frankly speaking, Indonesia's foreign exchange regime is so
\nliberal that we need to make some necessary adjustments,\" he told
\nreporters.<\/p>\n
Luhut, who was the Indonesian ambassador to Singapore before
\nhis current job, said the risk of applying capital control would
\nbe less than letting the currency fluctuate freely like it is
\nnow.<\/p>\n
\"The risk is actually low, and there should not be any major
\nconcern about this plan,\" Luhut said on the sidelines of a
\nseminar.<\/p>\n
He said the government's main objective to control the flow of
\ncurrencies was to stabilize the rupiah and prevent the currency
\nfrom being used for speculative trading.<\/p>\n
Amid heightened talks of the possibility that Indonesia would
\nimpose currency control, the rupiah gained ground on Friday,
\nwhile stock prices fell another 2.2 percent.<\/p>\n
Foreign exchange dealers said speculation that the government
\nwould impose currency control helped boost the rupiah to close
\nhigher at Rp 8,385 to the U.S. dollar from Rp 8,630 on Wednesday.<\/p>\n
This was unlike the foreign exchange market, where worries
\nover the capital control plan brought another blow to the local
\nstock market, which has been under pressure for the past several
\nweeks due to lingering uncertainty over domestic political and
\nsocial conditions.<\/p>\n
The Jakarta Stock Exchange (JSX), hitting another one-year low
\non Friday, ended down by 2.2 percent, or 9.87 points at 444.44
\npoints due to worries of currency control. The index lost nearly
\n40 percent of its value this year.<\/p>\n
Speculation that Indonesia will adopt capital control is not
\ntotally new, but this time investors feel more nervous after the
\nInternational Monetary Fund's (IMF) new managing director Horst
\nKoehler said in Bangkok over the weekend that capital control was
\nnot taboo.<\/p>\n
Investors fear the IMF boss could give a green light to an
\nIndonesian capital control plan. Koehler, unlike previous IMF top
\nofficials, is more open to the idea of a country adopting a
\ncurrency control system.<\/p>\n
The foreign exchange and equity markets expect to get a
\nclearer picture on the prospect of the capital control plan when
\nKoehler, who is now in South Korea, meets President Abdurrahman
\nWahid and his economic team on Sunday.<\/p>\n
Opposition<\/p>\n
Bank Indonesia governor Sjahril Sabirin opposed the \"all-out\"
\ncapital controls, but said he would consider some measures to
\ncontrol the flow of foreign exchange in and out of the country
\nand to ensure stability in the currency's value.<\/p>\n
\"I don't believe in applying capital control in Indonesia. But
\nwe may, of course, discuss whether we can benefit from taking
\nmeasures in limiting the flow of rupiah,\" Sjahril said.<\/p>\n
Agreeing with Sjahril, chairman of the Indonesian Chamber of
\nCommerce and Industry Aburizal Bakrie expressed disagreement if
\nthe government imposed capital control even if it was to help
\nstrengthen and stabilize the ailing rupiah.<\/p>\n
Aburizal said the plan was against the country's law, which
\nstipulated an open capital regime.<\/p>\n
\"I don't agree with the plans to impose capital control,\" he
\nsaid at a news conference at the headquarters of the National
\nBusiness Development Council (DPUN).<\/p>\n
But he agreed that steps must be taken by the government to
\nhelp stabilize the exchange rate of the rupiah to the U.S.
\ndollar.<\/p>\n
He suggested that the government should encourage the
\ncountry's exporters to keep their foreign exchange earnings at
\nhome to help support the rupiah.<\/p>\n
But Aburizal, more popularly known as Ical, said the central
\nbank should also have a swap facility so that exporters can
\npurchase back the dollars at the same rate they sold them at.<\/p>\n
\"Through this mechanism, the exporters do not lose anything
\nexcept for the capacity to be involved in currency speculation,\"
\nhe said.<\/p>\n
Ical said the country's export revenue reached more than $4
\nbillion per month, which would greatly help the economy if it is
\nkept in the country.<\/p>\n
Meanwhile, head of DPUN Sofyan Wanandi said he did not believe
\nthe government would impose capital control.<\/p>\n
\"I don't believe there will be capital control here,\" he said
\nat the same news conference.<\/p>\n
A few economists voicing similar views said Indonesia was not
\nready for currency control as the country still had huge overseas
\ndebts and a bureaucracy where corruption, collusion and nepotism
\nwas still rampant.<\/p>\n
\"Indonesia's economy is currently recovering, thus, it needs
\nforeign capital inflow, short term as well as long term. But
\nintroducing currency control would scare them away,\" one
\neconomist said.(udi\/rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-mulls-capital-control-to-protect-rupiah-1447893297",
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