Export drop blamed on rupiah value

Export drop blamed on rupiah value

JAKARTA (JP): The "unrealistically slow" depreciation of the
rupiah against the American dollar and various levies imposed on
businesses are the main factors responsible for the weakening of
Indonesia's export competitiveness, experts said yesterday.

Sjahrir, managing director of the Institute for Economics and
Financial Research, said here yesterday that the rupiah is
currently overvalued against the U.S. dollar.

"I don't believe that there has been a sustainable stability
in the value of the rupiah," Sjahrir said at a seminar organized
by the Indonesian Chamber of Commerce and Industry.

He reasoned that during the last three years, inflation rates
in the country stood at some nine percent per annum, while the
central bank depreciated the rupiah against the U.S. dollar by an
average of 4.5 percent per annum.

"The appreciation of our exports is faster than that of
imports. Therefore, it is very reasonable if our exporters expect
a devaluation of the rupiah against the dollar will occur in the
near future," Sjahrir said.

Executives at Bank Indonesia, the central bank, repeatedly
rejected any assumption that the rupiah is overvalued. They
contended that the calculation behind the depreciation has been
done in a "realistic" manner.

Laksamana Sukardi, chairman of the Reform Consulting
Institute, suggested before that the government devaluate the
rupiah against the dollar to curb imports and drive more exports.

Depreciation

Sjahrir, however, does not support any suggestion for
devaluation. "I would like to see depreciation of the rupiah not
far off the inflation rate this year.

"What I suggest is not a faster depreciation of the rupiah but
a better way to curb inflation so that it only reaches below 5
percent" he continued.

In addition to the slow depreciation of the rupiah, various
levies imposed on businesses have also been responsible for the
weak export growth during the last years, compared with the
growth of imports.

Official data shows that Indonesia's non-oil exports grew by
14.2 percent to US$25.14 billion in the January to September
period of last year, compared to $22.02 billion in the same
period of 1994.

Non-oil imports, however, grew by 32.4 percent during the
January-September period.

"From my personal observation, I conclude that no part of the
bureaucratic chain can be passed by businessmen without costs.
And I suspect that the level of those bureaucratic costs will
increase significantly this year," Sjahrir said.

In support of Sjahrir's contention, businessman Fadel
Muhammad, chairman of the Bukaka group, noted at the same seminar
that the country's international trade in the light industry
sector has been suffering a deficit of over $10 billion per annum
for the last five years.

Fadel said factors which reduce the competitiveness of light
industry include the use of old machinery, dependence on imported
raw materials and the burdening levies.

The Indonesian Textile Association, for instance, listed 35
kinds of levies, ranging from Rp 10,000 ($4.34) to Rp 800,000
imposed on the textile and textile-related industries.

Sjahrir said yesterday the weakening of Indonesia's export
competitiveness is becoming more serious as Indonesia's current
account deficit for this fiscal year is forecast to hit $7.9
billion, up from $3.49 billion in the last fiscal year.

To offset the increasing current account deficit, Indonesia
will need capital inflows of some $14 billion or 7.3 percent of
the country's gross domestic product, Sjahrir said.

He contended such an amount of capital is needed because not
all of the inflow can be used to compensate for the deficit.
"Much of the funds entering the country are speculative in
nature. They come here just to enjoy the interest rate
differentials. Thus, we cannot use such funds for productive
investment," he said.

Achjar Iljas, an executive at the central bank, gave
assurances yesterday that this fiscal year's growing current
account deficit will be still manageable. He projected that there
will be enough capital inflow to cover the deficits.

Central Bank Governor J. Soedradjad Djiwandono said earlier
this month that the government expects capital inflows of $10.64
billion this fiscal year, and thus, the overall balance of
payments will enjoy a surplus of $2.37 billion for the current
fiscal year. (rid)