BI refuses to weaken rupiah to boost exports

BI refuses to weaken rupiah to boost exports

Leony Aurora, The Jakarta Post, Jakarta

Bank Indonesia (BI) has refused to intervene in the foreign
exchange market and weigh in on the rupiah performance against
the U.S. dollar to boost exports in spite of calls from local
business players.

Speaking at an Indonesian Chamber of Commerce and Industry
(Kadin) business forum on Wednesday, BI governor Burhanuddin
Abdullah said that exports should be increased through efficiency
in the country's manufacturing sector.

"Let's postpone the idea of disturbing rupiah to boost
exports," he said in the opening session of the second day of the
two-day forum.

Indonesia is in desperate need for an increase in exports to
accelerate its economic growth, particularly as investment has
remained weak due to various uncertainties both at home and
overseas. The economic growth has been mainly driven by domestic
consumption.

Although last year's exports increased by 5.2 percent to US$61
billion from $57.2 billion in 2002, many experts believe that the
figure could have gone higher had the rupiah not appreciated vis
a vis the sliding greenback last year.

The local unit now stands at around Rp 8,400 per U.S. dollar,
about 6 percent stronger than its rate a year ago at Rp 8,900 per
U.S. dollar. It was one of the best performing currencies in the
region last year. The strengthening in the rupiah has been a
major factor behind the overall stability in several of the
country's key macroeconomic indicators.

A sharp appreciation in the value of the rupiah can make
Indonesian exports more expensive overseas, particularly compared
to those coming from countries whose currencies are not
appreciating as quickly as the rupiah.

Meanwhile, State Minister of State Enterprises Laksamana
Sukardi said that to improve the competitiveness of Indonesia's
business sector, the government would focus on four major areas.

"For business people, the most important is taxation," he
said on Tuesday.

The government is discussing amendments of the current tax
law, which is expected to bring lower tax rates and a simpler
process.

The second priority was to improve labor productivity, while
the third and the fourth were improvements of legal certainty and
security, respectively, said Laksamana.

For the last several years, local industries have lost their
edge in competing with foreign countries. China, for example,
provides cheaper labor and other Asean countries impose lower tax
rates than Indonesia.

In 2004, exports are expected to increase by 7 percent, thanks
to the reviving global economy and an estimated jump in exports
to China, which is now fourth for the top export destinations
from Indonesia.