More deregulation needed 'to protect rupiah'<\/p>\n
JAKARTA (JP): Senior economist Sumitro Djojohadikusumo and
\nbusinessmen Sofyan Wanandi and James T. Riady yesterday praised
\nthe government's quick move to expand the dollar-rupiah
\nintervention band to withstand speculative attacks on the rupiah.<\/p>\n
But they suggested the government further deregulate the
\neconomy, reduce the current account deficit and manage foreign
\ndebt to strengthen the economic fundamentals and keep speculators
\nout of Indonesia.<\/p>\n
Sumitro said Bank Indonesia's widening of the intervention
\nband and depreciation policy had discouraged speculators away
\nfrom the rupiah.<\/p>\n
\"Speculators are always there ... one of the weapons to
\nconfront speculators is to make 'lose their shirts', that is by
\nmaking the target of speculation infertile. If the target is
\ninfertile, they will lose,\" Sumitro said after a seminar here.<\/p>\n
He said the wider intervention band had made the rupiah
\n\"infertile\" and more expensive to speculate on, and let the
\nmarket bear all the costs and risks.<\/p>\n
Bank Indonesia Friday widened the dollar-rupiah intervention
\nband, in which the rupiah can float before the central bank
\nintervenes, from 8 percent to 12 percent.<\/p>\n
The move was made the day the Philippine peso was devalued,
\nfollowing the devaluation of the Thai baht early this month.<\/p>\n
Sumitro said speculative attacks on the rupiah were easing
\nfollowing the widening of the intervention band.<\/p>\n
The rupiah recovered to 2,450 per U.S. dollar at 5:15 p.m.
\nJakarta time yesterday from Rp. 2,453 at the opening and Rp.
\n2,469 on Monday.<\/p>\n
He predicted the government would not devalue the rupiah
\nbecause it had systematically depreciated the currency since the
\nlast devaluation in 1986.<\/p>\n
Unlike Indonesia, Thailand and the Philippines have long
\nfollowed relatively fixed currency rates.<\/p>\n
\"But of course in the short term we have to do several things
\nand stay vigilant,\" Sumitro said.<\/p>\n
\"And the most effective way to withstand speculation is to
\nreduce deficit and foreign debt and continue deregulation
\nmeasures,\" he added.<\/p>\n
He praised the government for the latest deregulation measures
\nit took earlier this month as \"the right move on the right
\ntrack\".<\/p>\n
\"But deregulation has to continue. The existing monopolies
\nneed to be dismantled; if not all, some is okay. But this is not
\na purely economic problem, it is political as well,\" Sumitro
\nsaid.<\/p>\n
Sofyan and James agreed, saying Indonesia should continue
\nprudent macro and microeconomic management to avert speculation
\non the rupiah.<\/p>\n
Sofyan, chairman of the Gemala group, warned that the rupiah
\nwould become prey for speculators unless the government further
\nimproved exports and reduced the current account deficit.<\/p>\n
He also warned that even the country's foreign exchange
\nreserves of slightly over US$20 billion would not be enough to
\nwithstand massive speculative attacks.<\/p>\n
\"Therefore, I appreciate what the central bank has done to
\nconfront speculators, by widening the intervention band and
\nforging cooperation with other central banks in the region,\"
\nSofyan said.<\/p>\n
He also called on local commercial banks to help the
\ngovernment withstand speculative attacks on the rupiah.<\/p>\n
James, deputy chairman of the Lippo group, said the central
\nbank's latest move to limit banking loans to the property sector
\nalso helped protect the rupiah from speculative attack.<\/p>\n
\"I see it as a preemptive strike to avert international
\nspeculators from attacking the rupiah for fear of the property
\nsector collapsing as it did in Thailand,\" James said.<\/p>\n
He said the property market in Indonesia was still healthy,
\ncompared to those in Thailand, the Philippines and even Malaysia.<\/p>\n
To maintain confidence in the rupiah, James said local
\ncorporations should maintain prudent financial management by
\navoiding short positions on the dollar. (rid)<\/p>\n
Currencies -- Page 12<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/more-deregulation-needed-to-protect-rupiah-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }