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)