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.