Chief economic minister upbeat on rupiah

JAKARTA (JP): The newly-appointed Coordinating Minister for Economic Affairs Rizal Ramli expects the rupiah to further strengthen against the U.S. dollar this year.

Rizal said on Saturday that he was optimistic that the rupiah would return to a reasonable value of between Rp 7,500-Rp 8,000 per dollar.

"With the initiatives and steps that will be taken, we're optimistic the rupiah will stabilize," he told the press at his office following the inauguration of the new Cabinet.

He also said that his office would improve cooperation with Bank Indonesia in order to maintain macroeconomic and monetary stability.

After rising to a three-month high of around Rp 8,090 per dollar, the rupiah suddenly plunged to around Rp 8,365 late on Wednesday following the announcement of the new Cabinet line-up.

Some have expressed fear that the rupiah could plunge to around Rp 10,000 per dollar due to the political instability created by the controversy surrounding the new Cabinet.

The markets are concerned because the Indonesian Democratic Party of Struggle (PDIP) of Vice President Megawati Sukarnoputri as well as other large political parties have not been proportionately represented in the Cabinet.

The new economic team was not as had been expected by the financial markets, particularly as regards the appointment of Prijadi Praptosuhardjo as the new Finance Minister. Prijadi had earlier failed to pass the central bank's "fit and proper test" for him to lead the state-owned Bank Rakyat Indonesia.

Rizal reiterated that the negative response of the financial markets was only a temporary phenomenon. He was optimistic that if the new economic team could prove that it was solid and effective, confidence would return.

"All of the economic ministers are determined to create a solid team," Rizal said.

He added that he would ask all members of the economic team to refrain from debating government policy outside the meeting room as such action would only create uncertainty.

"The debate must only be carried on in the meeting room," he said.

Abdurrahman's previous economic team had been criticized for its lack of teamwork and its ineffectiveness.

The rupiah ended relatively flat at Rp 8,380 per dollar on Friday, while the Jakarta Stock Exchange composite index ended up 0.9 percent at 486.907 points.

Currency and stock traders said that the statement by Megawati that she would not resign, despite reports that she was disappointed with the new Cabinet lineup, helped improve overall confidence in the financial markets.

The rupiah tumbled to a 21-month low of Rp 9,570 per dollar earlier this month due primarily to the political instability created by a rift among members of the country's political elite.

The current state budget assumes an exchange rate of Rp 7,000 per dollar.

Rizal was also optimistic about the prospects for the current April-December 2000 state budget given, particularly, current high oil prices.

He said that although certain revenue targets were lagging behind, the new economic team would work harder to achieve these targets during the remainder of the fiscal year.

"We still have room for maneuver," he said.

Several analysts had earlier expressed concern that the state revenue targets from the Indonesian Bank Restructuring Agency (IBRA) and privatization program might not be fulfilled.

IBRA has been targeted to raise Rp 18.9 trillion (US$2.28 billion) this year, but so far the agency has only raised some Rp 7.9 trillion in cash.

The government has also targeted the privatization of some nine state-owned enterprises this year to raise Rp 6.5 trillion in proceeds, but these privatizations have not taken place so far.

Asked about his plans with the controversial Master Settlement and Acquisition Agreement (MSAA), Rizal said that he would continue the "good policy" of his predecessor Kwik Kian Gie.

"But I will wait for input from the House of Representatives first before formulating a new policy," he said.

The House has formed an investigation team to decide whether to agree to the plans proposed by the previous economic team led by Kwik to revise the MSAA.

The MSAA is an agreement made by the previous administration of president B.J. Habibie with several top bankers to repay their debts to the government.

But Kwik demanded a revision of the agreement as implementing it in full could result in the government suffering huge losses.

Meanwhile, Kwik said on Saturday that he would now become a member of the legislature and would criticize and provide alternatives to government economic policies which he deemed to be inappropriate.

"If I disagree with a certain policy, I will criticize it and suggest an alternative," Kwik said on the sidelines of the Cabinet inauguration ceremony.

Kwik declined to comment on the MSAA issue, saying that it was a complex matter. (rei/prb)