Fix the rupiah

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