Strict policy needed in dealing with foreign funds<\/p>\n
JAKARTA (JP): Indonesia should have a strong monetary policy
\nin dealing with the harmful impact of the massive flow of foreign
\nfunds into the country, says Robert M. Stern, a senior economist
\nof the United States.<\/p>\n
Stern, a professor of economics and public policy of the
\nUniversity of Michigan, said yesterday that establishing a strong
\nmonetary instrument would be more affective than engaging in
\njoint forces with other nations.<\/p>\n
Speaking at a discussion on economic trends in the Asia-
\nPacific region held by the United States Information Services,
\nStern said central banks of rapidly growing countries, now
\nbecoming popular targets of global fund managers, should be
\nequipped with a strong policy to enable them to counter the
\npossible rush of foreign funds.<\/p>\n
Stern was in Jakarta to address a seminar on challenges and
\nopportunities of free trade in services jointly held by the
\nIndonesian Economists Association and United States Information
\nServices on Thursday.<\/p>\n
In yesterday's brief discussion, Stern said that at the
\ncurrent situation, in which most of the world's major financial
\nagencies have been electronically integrated, global fund
\nmanagers are more encouraged to switch their funds from one
\ncountry to another for a higher return.<\/p>\n
However, besides giving additional capital, more integrated
\nfinancial markets could cause troubles to the receiving country,
\nlike that hitting Mexico last year, he said.<\/p>\n
The massive rush of foreign funds from Mexico, which nearly
\nparalyzed the country's economy, also affected Taiwan, Hong Kong,
\nIndonesia and other Southeast Asian nations, causing a sharp
\ndepreciation of their currencies against the world's major
\nforeign currencies.<\/p>\n
The sequential impact of the financial crisis to Asian
\ncountries lasted for nearly a week, forcing central banks in the
\nregion to hold a meeting to jointly solve the problem.<\/p>\n
Impact<\/p>\n
Stern, who has published various books on international
\ncommodity problems, comparative advantage, price behavior of
\ninternational trade, balance-of-payment policies and computer
\nmodeling international trade and trade policies, said that the
\nimpact of the massive rush of foreign capital could be severer
\nwhen the liberalization of financial services, now in its early
\nstage, is fully implemented, if the central bank can't
\neffectively regulate the money in circulation.<\/p>\n
He also warned that domestic banks have to upgrade their
\nworkforce and technology to enable them to compete with larger
\nbanks from overseas, which, in the era of globalization, will no
\nlonger face barriers in entering Indonesia and other restricted
\ndeveloping countries.<\/p>\n
Stern said that the liberalization of financial services would
\nbe very costly to financial institutions in the developing world
\nbut would give a greater advantage to customers.<\/p>\n
He said that local banks should, therefore, be able to satisfy
\ntheir customers if they want to survive in the tight market.(hen)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/strict-policy-needed-in-dealing-with-foreign-funds-1447893297",
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