Hamzah backs tentative plan to drop U.S. dollar
Hamzah backs tentative plan to drop U.S. dollar
The Jakarta Post, Jakarta
Vice President Hamzah Haz has supported an idea to use the
euro as an alternative means of payment in international trade
and a component of foreign exchange reserves, as long as it would
be beneficial for the country's economy.
"If we adopt it, it must be for economic reasons and
efficiency, not for political reasons," Hamzah said over the
weekend.
He added that the plan must be assessed and considered
thoroughly and should never be carried out merely for political
reasons, for instance, the current U.S.-led military strikes on
Iraq.
Hamzah's remarks were the latest coming from government
officials giving support to such a call.
Previously, Minister of Finance Boediono said that the euro
would become more attractive if the U.S. dollar's current
depreciation trend against other currencies continued, as
occurred this week because of uncertainties over the war.
"An unstable foreign currency will be felt by its users. They
will find another hard currency that is more stable for their
transactions.
"Currently the (U.S.) dollar is dominating trade. But, later
the euro might emerge to replace it, I think this (the switch) is
possible," Boediono said.
Since it emerged four years ago, the euro -- which is used by
12 European countries -- has proved to be one of the world's top
currency performers.
Its value has managed to appreciate past the U.S. dollar,
which has been hit by waves of domestic economic and political
issues.
Since the beginning of last year, the U.S.'s economy slowed
down, putting huge pressure on the performance of the dollar.
A series of major accounting scandals in giant U.S. firms,
Enron, Merck and WorldCom, dealt a further blow to the confidence
in the U.S. economy. The devastating terrorists attacks on the
World Trade Center further hampered America's economic recovery.
All of the above incidents have added pressure to the U.S.
dollar.
The latest test for the dollar comes from the ongoing war in
Iraq, which saw the American greenback, after strengthening at
the start of the war, falter against other major currencies,
notably the euro.
All these have given rise to the idea of switching the means
of payment in international trade as well as a component of
Indonesia's foreign reserves to the euro.
Traditionally, most of Indonesia's export and import
transactions are conducted using the U.S. dollar.
Hamzah also said that before deciding to adopt the idea, a
study to determine the impact it would have on local and foreign
trade should be made first.
"One thing is for sure, the adoption of the euro as an
alternative means of payments could be an effective solution to
speculative dollar-oriented dealings," he said.
He added that using the euro in addition to the dollar held
many advantages for Indonesia's economy and foreign-debt
payments.
Noted currency analyst Farial Anwar was quoted by detik.com as
saying that such a plan should have been taken into consideration
by the government years ago.
"That's a positive idea and should have been applied long ago.
This is because the development of the euro has been very
positive since 2000, strengthening significantly in relation to
the dollar," Farial said.
"The dollar is currently unstable because, financially, the
U.S. is no longer deemed safe anymore."
Echoing Farial was Rizal Ramli, a former senior economic
minister, who said that Indonesia needed to start freeing itself
from its "bondage" to the dollar in financial dealings.
"It is important for Indonesia, and other developing
countries, to start balancing out their dependence on the dollar
by switching their financial orientation from the greenback to
other currencies, especially the euro," Rizal said.