Australia counts the cost of RI's downturn

Australia counts the cost of RI's downturn

SYDNEY (DPA): As Australian officials moved yesterday to shore up international confidence in Indonesia's ability to deal with its worst financial crisis in decades, business executives began to count the cost of Jakarta's sliding fortunes.

Deputy Prime Minister Tim Fischer, speaking on the eve of a visit to Thailand and Indonesia, was upbeat about the region's future and pledged that Canberra would consider any request from Jakarta for assistance.

"We've not received any, but we'd evaluate it on the basis of, is it in Australia's interests as well as Indonesia's interests, is it in our joint interests, as was the Thai currency swap," said Fischer, who also is trade minister.

Canberra contributed US$1 billion to the $7-billion rescue package the International Monetary Fund (IMF) put together in August to prop up the Thai economy.

With the Indonesian currency, the rupiah, falling in value by more than a third in three months, Jakarta has followed Thailand's cue and called on the IMF for assistance.

The sharp fall in the value of the rupiah has sparked concerns among Australian business executives that Indonesian companies might default on debts.

Australia receives more than A$3 billion (US$2.1 billion) a year in export receipts from Indonesia, accounting for about 3 percent of all export earnings.

Australian companies with big operations in Indonesia include mining giant BHP, trader Burns Philp, publishing behemoth News Corp and building materials company Boral.

Tony Berg, the managing director of Boral, said the markets had over-reacted to the rupiah's plunge but the downturn would certainly hurt Australian companies with operations in Indonesia.

Peter Brain, the executive director of the Australian National Institute for Economic and Industry Research (NIEI), predicted the region's economic maelstrom would be to the long term good.

"It will force reform in Asian countries, transforming their political and institutional structures so they more closely resemble our own." Brain also predicted the region's financial crisis could benefit Australia. "It will make this country more attractive for regional head offices and major investment projects in emerging technologies," he said.

But other analysts say the Asian currency shake-out could have a negative impact as devaluations across the region would make it harder for Australian companies to compete in export markets.

Tourists

The financial crisis in Southeast Asia has also forced many tourists to cancel a trip to Australia and has left many Sydney hotels with the highest vacancy rate in four years, Australian Hotels Association (AHA) said yesterday.

Occupancy rates for five star hotels in central Sydney during September was 71.7 percent, the lowest September rate for four years, Reuter reported.

"Various elements are contributing to the decline in occupancy rates. The Asian market is very soft, and the European market is down, therefore inbound levels are not materializing," said George Bedwani, AHA chairman of the New South Wales branch.

"Our potential growth markets are Malaysia and Indonesia who have been struck by major currency devaluation and people are deciding not to travel," David Travers, the general manager of the Landmark Parkroyal hotel said in a statement.

"The Thai and Korean markets are very price sensitive and they are getting better deals from Hawaii, in particular," Travers said. He said the traditional last minute bookings have also noticeably decreased over the last few months.

"The Japanese market is flat, however the Japanese still want to come to Australia but we are unable to translate this intent into actual sales," he said.