Indonesia cannot enforce capital controls: Anwar<\/p>\n
SINGAPORE (AFP): Indonesian central bank senior deputy
\ngovernor Anwar Nasution said here Tuesday that Jakarta had
\nshunned capital controls because they could not be enforced and
\nwould only deter foreign investors.<\/p>\n
Speaking on the sidelines of an economic forum, Anwar also
\nruled out any currency peg and interest rate hike, and said the
\nrupiah could return to the 7,000 level if domestic politics
\nstabilize.<\/p>\n
Despite the rupiah's sharp decline to around 8,500 to the
\ndollar, its lowest level for over a year, Anwar said it would not
\nbenefit Jakarta to introduce capital controls.<\/p>\n
\"There is no point to control the capital. It deters foreign
\ninvestors, it's like a fish trap or the 'bubu'... the fish can
\nget in but cannot get out. Indonesia is not a bubu,\" he told
\nreporters at the Asia Development Forum organized by Singapore,
\nJapan, the World Bank and the Asian Development Bank.<\/p>\n
Anwar also cited difficulties in implementing the curbs,
\nalthough neighboring Malaysia successfully imposed the controls
\nincluding a currency peg in 1998 when it sank into recession.<\/p>\n
\"We are a very much bigger country. We have 17,000 islands ...
\nand the legal system is also not as strong as Malaysia,\" he said.<\/p>\n
\"I cannot imagine how we can enforce and implement the
\ncontrols. We tried in the past but we face corruption, so it
\nwon't work.\"<\/p>\n
Indonesian President Abdurrahman Wahid said Monday that curbs
\nwould not be introduced as it would be counterproductive.<\/p>\n
But Jakarta will require everyone entering or leaving the
\ncountry to register any amounts of currency they were carrying
\nover five million rupiah (US$588), Abdurrahman said.<\/p>\n
Anwar also ruled out plans to peg the rupiah to the US dollar,
\nciting Hong Kong's past experience where it was forced to spend
\nhuge sums of its external reserves to defend the peg.<\/p>\n
\"We are not that rich,\" he said.<\/p>\n
He voiced confidence that the rupiah could improve if
\nIndonesia's political concerns were addressed.<\/p>\n
\"If we stabilize again, if we solve the political and security
\nproblems, we can easily get back rapid rates of growth and easily
\nget back to a stronger rupiah,\" he said.<\/p>\n
But Anwar cautioned the situation could worsen when
\nIndonesia's People's Consultative Assembly, the highest
\nlegislative body with the legal power to dismiss President
\nAbdurrahman Wahid, convenes in August to hear him account for his
\nrule.<\/p>\n
\"It can be volatile if they cannot control (the situation).
\nSome people said they are going to impeach the president. I think
\nit is going to be quite unproductive for the economy... but it's
\nbeyond our control,\" he said.<\/p>\n
Anwar said Indonesia had no need to raise interest rates at
\nthe moment.<\/p>\n
\"At present, the interest rate is hovering around 12 percent
\nwhile inflation rate is at the five percent level, so we have a
\nsix to seven percent real interest rate. I think it is one of the
\nhighest on earth,\" he said.<\/p>\n
Asked if bank governor Sjahril Sabirin should step down
\ntemporarily after he was named as a suspect in the $80 million
\nBank Bali scandal, Anwar said it was \"quite unfortunate\" but
\ndeclined to comment.<\/p>\n
Sjahril was charged with violating the Corruption Crimes Law
\nby failing to implement prudential banking practices but he
\nrefused to step down despite being urged by the president.<\/p>",
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