Chief economic minister upbeat on rupiah

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)