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)