Fix the rupiah

There has been so much talk about the effects of the crisis that it seems to me everyone is forgetting the reason. The most important comment made by Steve Hanke, as he tried his best to help, was "It's the rupiah, stupid." The solution is simple and it involves exchange controls, tax amnesty and strict legal penalties for transgressors:

a. President Habibie and coordinating ministers Ginandjar Kartasasmita and Hartarto announce -- at 7 p.m. on a Saturday night -- that the rupiah exchange rate is fixed at Rp 3,600 to US$1.

b. Separate presidential regulations are signed, effective immediately, which make it illegal for companies and individuals to enter foreign currency transactions without approval. Penalty is confiscation of the currency transaction and a mandatory prison sentence of eight months in jail for transactions below $10,000 and eight years in jail for transactions above $10,000.

c. Bank Indonesia -- on application -- issues approvals to bona fide importers, those with registered foreign debt, dividends to foreign shareholders and others with an approved "need" for foreign currency. A copy of each approval is sent to a new independent regulatory body which audits the applicants.

d. Indonesian citizens are advised that it is illegal to hold foreign currency accounts overseas. A one-month tax amnesty is granted for the repatriation of this money and its transfer into onshore rupiah accounts. Similar jail sentences will apply.

e. It is illegal (and now unnecessary) for Indonesian companies and individuals (property owners, hotels, consultants etc.) to make onshore transactions in foreign currency.

f. Special exemptions are allowed for tourists, overseas medical and education, travel, etc. Non-Indonesian workers, employed with the proper authority in Indonesia, may receive a portion of their remuneration offshore. This must be declared and is subject to Indonesian tax. Salary payments onshore may not be repatriated. Again, company directors and individuals will go to jail if they think these rules don't apply to them

g. Indonesia reintroduces the DICS rupiah system to kick-start the flow of new investment dollars.

h. The prison system is to be opened to foreign investment and is financed by fines and confiscated foreign currency.

So now that the currency problem if fixed in one night, let's get the nation back to work.

JOHN SLACK

Jakarta