Business community seeks help during war

A'an Suryana, The Jakarta Post, Jakarta

Business leaders demanded on Friday the government and the central bank take immediate action to mitigate the impact of the Iraq war on the country's business sector and the overall economy.

These measures might include tax breaks and a loosening of Bank Indonesia's monetary and banking policies.

"The government needs to take concrete and swift measures to contain the impact of the Iraq war on our economy," Aburizal Bakrie, chairman of the Indonesian Chamber of Commerce and Industry (Kadin), said during a press conference attended by a number of business leaders.

"Even before the war broke out, local industries were already suffering," said the chairman of the Indonesian Textile Association, Benny Soetrisno.

He said many textile companies had gone bankrupt over the past year because of shrinking overseas markets and domestic problems.

"Most textile deliveries to countries in the Middle East have been canceled (because of the war)," said Benny, adding that without immediate help from the government more companies would go under, aggravating the country's unemployment problem.

Textiles are one of the country's most important non-oil and gas exports, and the industry employs a huge number of people.

The tourist industry is also asking for government help, particularly in ensuring the safety of foreign tourists.

"Australians, for example, are reluctant to come to Indonesia because they are scared of a possible backlash here," said industry leader Hariyadi B. Sukamdani.

Australia is among the countries supporting the U.S. in the war in Iraq. There have been concerns that anti-Western protesters here will target people from countries supporting the U.S.

Tourism is also a major source of foreign exchange revenue for Indonesia. The industry, however, has seen falling tourist arrivals since the Oct. 12 Bali bombings.

Business leaders said the prospect of slowing exports was aggravated by the weak purchasing power of people at home, thus preventing businesses from expanding their markets here.

Analysts have said that if the war drags on it would worsen the already fragile economies of the U.S. and other developed nations, most of which are Indonesia's main export markets.

Kadin has proposed a relaxation of the tax policy, allowing businesses to delay tax payments to help them maintain cash flow.

"The payment of corporate tax and value added tax could be delayed for six months, for example," said Aburizal.

Aburizal also said the central bank should continue lowering domestic interest rates and easing bank rulings to allow banks to provide more and cheaper loans to the real sector.

He suggested that the requirements on capital adequacy ratio (CAR) and nonperforming loans (NPLs) could be loosened.

CAR is the ratio between a bank's capital and risk-weighted assets such as credits, while NPLs are the ratio between loans that have turned sour and outstanding loans. Banks are required to have a minimum CAR level of 8 percent and NPLs of no more than 5 percent.

Banks remain reluctant to increase lending on the fear that their capital condition could fall below the central bank's requirements and that their NPLs could rise.

The chairman of the National Economic Recovery Committee, Sofyan Wanandi, said the government must also spend more money to finance labor intensive projects to help increase the people's purchasing power.

"The government must accelerate the implementation of infrastructure projects ... to help spur the economy," he said.

Businessman Thomas Dharmawan urged the government to curb illegal fees, which have created a high-cost economy and have affected the competitiveness of local industries.