Kwik upbeat rupiah will strengthen

Kwik upbeat rupiah will strengthen

JAKARTA (JP): Newly appointed Coordinating Minister for
Economy, Finance and Industry Kwik Kian Gie said on Wednesday
that the rupiah could strengthen to Rp 6,000 against the U.S.
dollar if the new government could prove its commitment to uphold
the supremacy of the law.

Kwik said that upholding the supremacy of the law was key to
the return of foreign investors' confidence into the country.

"I can't say when (the rupiah will strengthen to the Rp 6,000
level) because it's a matter of trust," he said in a press
conference following a meeting with President Abdurrahman Wahid,
popularly known as Gus Dur.

Kwik was accompanied by five other economic ministers.

The rupiah ended lower on Wednesday at Rp 6,910 against the
American greenback as compared to Rp 6,785 at the previous day's
close as investors took profit from the recent rally driven by
last week's successful presidential election.

Strengthening the rupiah is seen as a cornerstone toward the
country's economic recovery.

The rupiah plunged to as low as Rp 17,000 to the dollar last
year when the economic crisis deepened.

Head of research at securities firm PT Vickers Ballas Tamara
Ferry Y. Hartoyo said that although Indonesia now has a new,
credible government, elected democratically, which would provide
social and political stability, foreign investors would remain on
the sidelines until the new government could prove its commitment
with reforms, and by particularly upholding the law.

"The most important thing is how to show that in Indonesia the
law is not discriminative," Ferry said.

"And the best way to start is with the resolution of the Bank
Bali scandal," he added.

Ferry said that foreign investors' confidence had plunged
following the economic and political crisis, as reflected in the
fall in foreign direct investment (FDI) from US$111 billion in
1997 to $60 billion in 1998 and $11 billion in the first half of
this year.

"That's only the approval figure, the realized investment is
much lower, possibly at about 30 percent," he added.

He said that an increase in realized FDI would be significant
in boosting the value of the rupiah.

The Bank Bali scandal centers around the legally dubious
transfer of Rp 546 billion (about $80 million) in commission fees
from the bank to a private firm linked with influential people
close to former president B.J. Habibie.

The Habibie administration had been dragging its feet in
resolving the scandal as it declined to publish the
PricewaterhouseCoopers (PwC) audit report on the scandal as
demanded by the International Monetary Fund (IMF).

The IMF and the World Bank suspended loan disbursements after
Indonesia failed to honor its promise to publish the PwC report.

The PwC report is now in the hands of the House of
Representatives, which will decide on whether to publish it or
not.

Kwik stressed that it's important to publish the report to
meet the transparency demanded both from public investors and
donor institutions, particularly the IMF.

Kwik also said that the police must move quickly to resolve
the scandal satisfactorily.

"Your role (the press) is important to check on how far the
police have gone," he said.

The police have arrested several people allegedly involved in
the scandal but it has yet to take similar measures against the
influential people.

Kwik said that resolving the Bank Bali scandal was key to
amending the country's relations with the IMF as well as other
donors.

"In the short term, Indonesia can't do without the IMF," he
said.

Kwik pointed out that Indonesia had limited cash to finance
its own economic programs, including providing support for the
poor amid the current crisis.

"We don't want to lose one generation," he said, pointing to
the threat of malnutrition and school dropouts among the poor.

Ferry agreed that foreign loans were crucial to Indonesia.

"The budget deficit this (fiscal) year is estimated at $8-9
billion. Next year it could double," he said.

Meanwhile, Kwik also dismissed concerns that the new economic
team would have difficulty in terms of cooperation and
coordination.

"I'm sure that we can do it, because those who sit here are
educated bureaucrats and statesmen who work for the interests of
the people," he said.

"There will be no difficulties in coordination ... give us a
chance (to prove it)," he said.

Analysts criticized the new economic team for being appointed
more on political considerations rather than on capability to fix
the crisis-hit economy. They particularly have reservations
about Finance Minister Bambang Sudibyo, who is unknown to the
market, and Trade and Industry Minister Jusuf Kalla, a local
businessman deemed to have the lack of vision to bring the
country toward the globalization era.(rei/prb)