Japan's business leaders cool on Jakarta's CBS plan
Japan's business leaders cool on Jakarta's CBS plan
TOKYO (AFP): The president of the Indonesian Chamber of Commerce and Industry (Kadin), Aburizal Bakrie, asked his Japanese counterpart yesterday whether Tokyo could help out if Jakarta runs out of hard currency to support a currency peg, an official said.
He received a cool response.
Aburizal explained the widely-criticized currency board plan to Shoichiro Toyoda, chairman of Japan's Federation of Economic Organizations (Keidanren), a Keidanren spokeswoman said.
The Indonesia business leader "explained what the currency system under consideration is and Indonesia's intention to do it," said the Japanese business federation spokeswoman.
"He asked for Japan's support in case there is a shortage of foreign currency reserves to back the currency board system." But Bakrie came away with nothing.
"Our chairman did not say he understood their request but simply listened to what he had to say," said the Japanese federation spokeswoman. In Japan, a statement of understanding can be taken to imply agreement.
The Indonesian Chamber of Commerce and Industry delegation arrived in Tokyo Wednesday for talks on rescheduling Jakarta's US$23 billion private-sector debt to Japanese banks.
The 16-member delegation, led by Aburizal, is meeting top Japanese business figures to explain the economic environment in crisis-torn Indonesia.
U.S. Treasury Secretary Robert Rubin and the IMF on Thursday again pressed Indonesian authorities to stick to IMF-backed reform measures and to postpone plans to set up a currency board.
President Soeharto's interest in establishing a special board to manage fluctuations in the local currency, the rupiah, has unnerved some of Jakarta's overseas creditors.
They fear that using government resources to peg the rupiah to the dollar could interfere with other essential objectives, such as growth, reasonable interest rates and employment stability.
In Bangkok, a top regional analyst yesterday backed Indonesia's decision to implement a currency board.
Right track
SocGen-Crosby's regional research director Neil Saker said Jakarta's recent decision to adopt a currency board to control the rupiah was on the right track.
"I think that one idea that should be seriously considered is the idea of currency boards. With a currency board arrangement there is no political way of controlling money supply and defending the currency," Saker said.
He said Indonesia, which is already experiencing unrest as a result of rising food prices, should introduce the system immediately as it was the only way the troubled country could avoid hyperinflation.
"In Indonesia, for instance, I think we would advocate the solution because the banking sector problems are so big that most of them will fall anyway no matter what happens," Saker said.
Saker said that Indonesia was at risk of a total meltdown unless it adopted a currency board to control the rupiah, whereas the situation in Thailand was nowhere near that critical and could wait until sometime next year.