More concrete steps needed to defend rupiah: Economists

JAKARTA (JP): Economists and members of the House of Representatives said they were optimistic the rupiah would soon stabilize but warned that more concrete measures were needed for similar currency turmoil in the future.

Like other analysts, Anwar Nasution, a senior economist of the University of Indonesia, said that he believed Bank Indonesia's recent move to remove the intervention band would end the speculative attacks on the rupiah.

But Anwar cautioned that more measures were needed to ensure that the rupiah would not become a target of speculators in the future.

He said more concrete steps should be taken to follow up the removal of the rupiah's intervention band.

"They urged for the introduction of monetary and fiscal measures to shore up the rupiah, ... but what they are? ... they did not mention them in specific," he said of a government official's statements.

He cited that more guidelines should be issued to address the weakness in the country's economic illness, such as the country's ailing banks.

President Soeharto said in his speech on the eve of the commemoration of the 52nd anniversary of Indonesia's Independence Day, that the government would continue to maintain the tight money policy to stabilize the rupiah.

Soeharto also hinted at a possible curb on foreign borrowings to maintain the balance of payments in a sustainable level.

Commenting on the possible curb of foreign borrowings, Coordinating Minister for Economy and Finance Saleh Afiff said such a move would be counterproductive.

"The private sector can only voluntarily control its borrowings," Afiff said, adding that a regulation which controls foreign borrowing by the private sector would only hurt the investment climate.

Indonesia's overall foreign debt stands at more than US$110 billion, half of which is owed by the public sector.

Economist Emil Salim, a former minister of environment, said it was not necessary to issue a new ruling to curb private borrowings.

"I think the best way for the government, is to activate the commercial borrowing caps set several years ago," he said.

Economist Faisal Basri said the most important thing for the government was to issue rulings eliminating the practices of monopoly and oligopoly in the country.

Legislator Tadjudin Noor Said of Golkar wondered as to whether the country's economic fundamentals were as strong as the government stated.

"Instead of blaming only the rupiah upheaval on speculators, we'd better look at ourselves to see the any weaknesses in our economic structure," said Tadjudin.

Tadjudin said the weaknesses include the fact that most of the country's assets were controlled by the top 200 taxpayers, and economic development was concentrated in one area, that is Jabotabek (Jakarta, Bogor, Tangerang and Bekasi).

About 75 percent of foreign investment was in Jabotabek during the Sixth Five Year Development Plan, which will end in 1998, he said.

"I am afraid what the government claimed as a 7.98 percent national economic growth may be the growth of the top 200 taxpayers (big conglomerates) or the economic growth in the Jabotabek area," he said. (aly/jsk)