Four business sectors severely hit by turmoil

JAKARTA (JP): Construction, financial, transportation and telecommunications sectors had been the hardest hit by the country's monetary crisis, an analyst said yesterday.

Didik J. Rachbini, a senior researcher at the Institute for Development of Economics and Finance, said the construction sector should delay new projects or at least slow their pace if they wanted to survive.

"The excessive expansion programs in these sectors in previous years, coupled with the currency crisis, will force them to grow at a slower pace next year," he said at a seminar here yesterday titled "A strategy to face the economic and business conditions of 1998".

"All the difficulties in these sectors stem from the problems in the banking sector," he said.

Didik said the transportation and telecommunications sectors, which were indirectly influenced by the monetary crisis, would also slow down next year.

However, he said the manufacturing and mining sectors would see better prospects in 1998 because most of their products were exported to overseas markets.

"The rupiah's depreciation, in turn, has benefited companies which export their products overseas," he said.

The chairman of the Gemala Group, Sofjan Wanandi, urged business communities in Indonesia yesterday to temporarily halt any expansion plans next year in the face of the monetary crisis hampering the country's economy.

"All we can do now is learn how to survive ... and there should not be any more expansion programs by the business community next year," he said.

He said most companies had faced liquidity problems because of the tight monetary policy imposed by the government to shore up the rupiah against the U.S. dollar.

The rupiah has lost almost 35 percent of its value against the dollar since early July.

Sofyan expected that lending rates in the banking system would be reduced further to stimulate business activities.

Private banks currently impose lending rates of between 30 percent and 35 percent.

"We, in the business sector, expect the lending rates to be reduced to a favorable level of between 22 percent and 24 percent," he said while adding that these rates could be further reduced in the future.

From a macroeconomic point of view, Didik predicted that economic growth would decline to 6 percent in 1998 and 6.4 percent this year from 7 percent in 1996 due to the impact of the monetary crisis in the second half of this year,

However, he said the trend of slow economic growth did not only take place in Indonesia but also in other countries in the region which had been hit by the currency crisis.

"So it's not only Indonesia that will see a decline in economic growth but other countries in the region as well," he said.

He said the economic growth of Malaysia, for example, would be about 6.8 percent in 1998 and 8 percent this year.

"This is lower than Malaysia's 8.4 percent in 1996," he said. (aly)