Govt urged to act swiftly against rumors
JAKARTA (JP): The government's slow response to public rumors concerning the banking industry may have triggered further public unease, an economist has said.
The chairman of the Indonesian Business Data Center, Christianto Wibisono, told The Jakarta Post yesterday the government must quickly respond to rumors so that the banking sector would not be further hurt.
The Association of Private National Banks (Perbanas) said yesterday rumors regarding local banks were aimed to adversely affect Indonesia's economy.
Perbanas secretary-general Leonard Tanubrata said the rumors were fabricated to shake not only the country's private banks but also the whole economy, Antara reported.
He said the recent circulation of rumors could be considered an act of subversion.
The deputy head of Perbanas' foreign division, Wibowo Ngaserin, said the rumors "must have come from somebody who knows market psychology in banking".
Christianto said that news about financial woes from overseas could also negatively affect Indonesia.
"Today, people are very informed about local and international news. The collapse of other economies in the region has made the market more sensitive," Christianto said.
He said the downfall of Japan's finance sector and the collapse of the South Korean economy has made people worry that the Indonesian economy could further worsen.
At the same time, the government's seemingly incoherent moves had made people feel that they had no backing from the government, he said.
As a result the market had become susceptible to both official and unofficial information.
"Any kind of statement made by the government or the private sector can be misperceived," he said.
Christianto said Minister of Finance Mar'ie Muhammad's recent statement that the joint intervention with Japan and Singapore to shore up rupiah had been temporarily suspended further dragged down the currency against the U.S. dollar.
The Indonesian Chamber of Commerce's call on private firms yesterday to lobby international creditors also might have made people think that many large corporations would tumble like in South Korea.
To avoid stirring up the market further, both the private sector and the government must be selective of what they say.
"It is better to take an action first before saying anything about it," he said.
International institutions such as the International Monetary Fund must also not release statements that could create further market instability.
The psychological effect of the situation on the market was getting dangerous, he said.
"What we have is a panicked market in the midst of a crisis -- kind of like a bunch of people panicking during a fire," he said. "This only worsens the situation."
The local banking industry has been hit by many rumors since the government closed 16 ailing private banks as part of an economic reform to support the IMF bailout program.
The latest rumors circulating this week created concern that the government would convert bank deposits of more than Rp 20 million (US$5,128) into government bonds so that the money would be kept longer in the banking system and not redeemed to buy U.S. dollars.
A rumor that the government might freeze dollar accounts to support the rupiah also has been circulating.
Bank Indonesia denied the rumors yesterday, but many bank depositors had already rushed to withdraw their funds from state and local banks prior to the central bank's statement.
Analysts said yesterday that the rumors had partly fueled speculative trading in the money market, pushing the rupiah to breach the 4000 psychological barrier.
Christianto said the rumors made many people worried that the government would repeat its move in 1959 when it ordered the conversion of bank deposits of up to Rp 50,000 into government bonds.
"That happened at a time when our economy under (Indonesia's first president) Soekarno did not seek help from the IMF," he said.
But, such a move would never happen now, especially after the IMF's agreement to assist Indonesia, he said. (das)