Rupiah Slide Pushes Indonesian Firms Into Cost-Cutting Mode<\/p>\n
Jakarta. Indonesia\u2019s business sector is facing mounting pressure from\nthe weakening rupiah, with industry leaders warning of rising production\ncosts, heavier dollar-denominated obligations, and growing uncertainty\nfor investment decisions.<\/p>\n
According to the Indonesian Employers Association (Apindo), the\ndepreciation of the rupiah against the dollar has begun to significantly\naffect industries that remain heavily dependent on imported raw\nmaterials.<\/p>\n
Apindo chairwoman Shinta Kamdani said companies are strengthening\nrisk management strategies to cope with the currency volatility and\nbroader global economic uncertainty.<\/p>\n
\u201cBusinesses are reinforcing more comprehensive risk management\nstrategies. The use of hedging instruments against exchange-rate\nfluctuations is being increased, along with efforts to rebalance debt\nstructures,\u201d Shinta said on Friday.<\/p>\n
The rupiah weakened to Rp 17,596 per dollar in the spot market on\nFriday, according to Bloomberg data, marking a decline of 67 points, or\n0.39%.<\/p>\n
Shinta said the weakening currency has had a direct impact on\nproduction costs, particularly in manufacturing industries where\nimported raw materials account for a substantial share of operating\nexpenses.<\/p>\n
\u201cAbout 70% of manufacturing raw materials still come from imports,\nwhile raw materials contribute around 55% of total production costs. As\na result, rupiah depreciation is immediately reflected in higher costs,\u201d\nshe said.<\/p>\n
Industries considered most vulnerable include petrochemicals,\nplastics, food and beverages, pharmaceuticals, and energy-intensive\nmanufacturing sectors, all of which rely heavily on imported inputs.<\/p>\n
One of the clearest examples can be seen in the plastics industry,\nwhere rising global naphtha prices have pushed resin prices up sharply\nin recent months. The increase has had a ripple effect across downstream\nindustries, particularly packaging manufacturers and other sectors\nreliant on plastic-based materials.<\/p>\n
Apindo warned that the situation is contributing to cost-push\ninflation, where higher production expenses gradually feed through to\nconsumer prices across supply chains.<\/p>\n
Beyond financial risk management, companies are also pursuing\noperational efficiency measures by tightening capital expenditure and\noptimizing working capital to preserve financial stability.<\/p>\n
Businesses are additionally seeking to diversify suppliers and\npromote import substitution in an effort to reduce dependence on\noverseas raw materials. However, Shinta acknowledged that domestic\nsubstitution capacity remains limited across many industrial\nsectors.<\/p>\n
Despite the challenges, she said businesses still have room to adapt,\nalthough strong external pressures and limited policy flexibility have\nconstrained the pace of adjustment.<\/p>\n
Apindo emphasized that closer coordination between the government,\nmonetary authorities, and the private sector would be crucial to\nmaintaining economic stability.<\/p>\n
\u201cIn a situation where external pressures remain strong and policy\neasing space is relatively limited, synergy between monetary, fiscal,\nand real-sector policies becomes extremely important,\u201d Shinta said.<\/p>\n
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