Indonesian Rupiah May Gain by Year-End as Polls Buoy Investment
I share that view, and I do think that Boediono and Sri have done an excellent job of putting backup borrowing funding in place adequate to get the country through the crisis in what is likely to be a very difficult environment for developing countries to raise capital.
Indonesia has an economy which, largely because it is 70% domestically driven (Which raises its own questions regarding both investment and the grey economy)is still growing, albeit at a lower rate. In this regard, it is one of very few countries.
The IDR has been unecessarily penalised in the credit crisis. However, foreign investors always get the blame for withdrawal of "Hot money". Whilst foreign "Risk aversion" in this environment has certainly contributed to the pressure on the IDR, actually the arguement does not bear scrutiny. The data actually show that it is LOCAL investors who cause the greater part of the problem. This includes local private investors, who are a truly panicky bunch, but more importantly State owned Banks and State owned Enterprises. The Banks horde USD and stop lending in favour of loading their balance sheets with SBI's and TBonds, which generate good returns with no risk. The SOE's horde dollars and buy Dollars.
If GOI can't control itself, then I suppose that blaming foreigners will remain the usual bogey-man for public consumption. How unusual.
Indonesia has an economy which, largely because it is 70% domestically driven (Which raises its own questions regarding both investment and the grey economy)is still growing, albeit at a lower rate. In this regard, it is one of very few countries.
The IDR has been unecessarily penalised in the credit crisis. However, foreign investors always get the blame for withdrawal of "Hot money". Whilst foreign "Risk aversion" in this environment has certainly contributed to the pressure on the IDR, actually the arguement does not bear scrutiny. The data actually show that it is LOCAL investors who cause the greater part of the problem. This includes local private investors, who are a truly panicky bunch, but more importantly State owned Banks and State owned Enterprises. The Banks horde USD and stop lending in favour of loading their balance sheets with SBI's and TBonds, which generate good returns with no risk. The SOE's horde dollars and buy Dollars.
If GOI can't control itself, then I suppose that blaming foreigners will remain the usual bogey-man for public consumption. How unusual.