Sun, 07 Mar 1999

Help your mates

Almost two years have elapsed since the present monetary crisis began in July 1997, and until now we still do not see any light at the end of the tunnel.

We currently adopt the floating rate system, and every exporter is allowed to keep his earnings for himself. Perhaps this is the reason why at present we are still in dire need of U.S. dollars. As the demand for the dollar keeps increasing -- to pay our foreign debt among other things -- it will take some time before the rupiah-dollar exchange rate returns to its pre-July 1997 level.

About four decades ago, a government regulation obliged exporters to hand over their export revenue to the government in exchange for rupiah at the current exchange rate at the time.

Later on, when exporters needed to import raw materials or capital goods for their products, they could apply for the essential dollars to even out the letter of credit.

So a controlled foreign exchange (forex) system prevailed at that time, which I believe might be the best way to overcome the present crisis.

After all, all the present miseries are caused by the shortage of dollars. Our neighbor, Malaysia, adopts the controlled forex system, which seems to succeed magnificently, because the ringgit remains stable at RM3.8 per dollar with only minor fluctuations.

Of course, such a system also has its drawbacks, as it will encourage unscrupulous persons to use their usual sly tricks to stash away foreign capital abroad. For example, some of them do this by under- and over-invoicing.

For the uninitiated, the following simple explanation might be useful: 1) A exports to B in country C; the price agreed upon for commodity X is $100; B opens the Letter of Credit (L/C) at $80 and $20 is kept abroad in A's account. 2) A imports from B from country C; the price for commodity X is $100. A opens the L/C at $120 to B and B invoices accordingly, the $20 is kept abroad.

A black market in foreign currencies might also be created. But if all the exporters and importers had a sense of patriotism and are all imbued with the spirit of gotong royong (community mutual help) to overcome the present crisis. Moreover this could be regarded as a token of gratitude to Ibu Pertiwi (Mother Earth), who made all the exports possible. Heaven helps those who help themselves.