Kadin urges govt to focus on liquidity

Kadin urges govt to focus on liquidity

JAKARTA (JP): The Indonesian Chamber of Commerce and Industry
(Kadin) called on the government to put more emphasis on market
liquidity rather than on strengthening the rupiah, to help local
companies survive.

The chamber's chairman Aburizal Bakrie said yesterday that
many companies were suffering from cash-flow problems because of
the government's tight monetary policy.

"The economy's liquidity is not enough now and we'll keep on
asking the government to provide more liquidity until the
monetary policy is relaxed," Aburizal said.

He also asked the government to use some of the standby loans
provided by the International Monetary Fund (IMF) to buy money
market securities from commercial banks to increase economic
liquidity.

The IMF agreed last month to give financial aid worth US$23
billion through an economic reform program to help stabilize the
rupiah and restore confidence in the country's economy.

Aburizal said measures taken by the government to loosen
liquidity, including lowering interest rates and reopening short-
term money market securities, were not enough.

He said lending rates imposed by banks were still high,
although the central bank had lowered the interest rates of its
SBI commercial papers.

Favorable lending rates were supposedly between 20 percent and
23 percent, he said.

"But we have to make sure the loans are available at these
rates," he said.

Aburizal said since the government closed 16 banks on Nov. 1
as part of economic reforms, local private banks were now divided
into two groups: one made up of large banks and the other of
small banks.

The bank closures had prompted many people to place their
funds in state and foreign banks instead of private banks.

Both small and large banks now rely on the sale of their SBPU
certificates to the central bank to maintain their day-to-day
transactions.

Aburizal said the government should also control inflation by
issuing more deregulation measures to smoothen the flow of
products, so that cash flow and products would be in balance.
(das)