More deregulation needed 'to protect rupiah'
More deregulation needed 'to protect rupiah'
JAKARTA (JP): Senior economist Sumitro Djojohadikusumo and
businessmen Sofyan Wanandi and James T. Riady yesterday praised
the government's quick move to expand the dollar-rupiah
intervention band to withstand speculative attacks on the rupiah.
But they suggested the government further deregulate the
economy, reduce the current account deficit and manage foreign
debt to strengthen the economic fundamentals and keep speculators
out of Indonesia.
Sumitro said Bank Indonesia's widening of the intervention
band and depreciation policy had discouraged speculators away
from the rupiah.
"Speculators are always there ... one of the weapons to
confront speculators is to make 'lose their shirts', that is by
making the target of speculation infertile. If the target is
infertile, they will lose," Sumitro said after a seminar here.
He said the wider intervention band had made the rupiah
"infertile" and more expensive to speculate on, and let the
market bear all the costs and risks.
Bank Indonesia Friday widened the dollar-rupiah intervention
band, in which the rupiah can float before the central bank
intervenes, from 8 percent to 12 percent.
The move was made the day the Philippine peso was devalued,
following the devaluation of the Thai baht early this month.
Sumitro said speculative attacks on the rupiah were easing
following the widening of the intervention band.
The rupiah recovered to 2,450 per U.S. dollar at 5:15 p.m.
Jakarta time yesterday from Rp. 2,453 at the opening and Rp.
2,469 on Monday.
He predicted the government would not devalue the rupiah
because it had systematically depreciated the currency since the
last devaluation in 1986.
Unlike Indonesia, Thailand and the Philippines have long
followed relatively fixed currency rates.
"But of course in the short term we have to do several things
and stay vigilant," Sumitro said.
"And the most effective way to withstand speculation is to
reduce deficit and foreign debt and continue deregulation
measures," he added.
He praised the government for the latest deregulation measures
it took earlier this month as "the right move on the right
track".
"But deregulation has to continue. The existing monopolies
need to be dismantled; if not all, some is okay. But this is not
a purely economic problem, it is political as well," Sumitro
said.
Sofyan and James agreed, saying Indonesia should continue
prudent macro and microeconomic management to avert speculation
on the rupiah.
Sofyan, chairman of the Gemala group, warned that the rupiah
would become prey for speculators unless the government further
improved exports and reduced the current account deficit.
He also warned that even the country's foreign exchange
reserves of slightly over US$20 billion would not be enough to
withstand massive speculative attacks.
"Therefore, I appreciate what the central bank has done to
confront speculators, by widening the intervention band and
forging cooperation with other central banks in the region,"
Sofyan said.
He also called on local commercial banks to help the
government withstand speculative attacks on the rupiah.
James, deputy chairman of the Lippo group, said the central
bank's latest move to limit banking loans to the property sector
also helped protect the rupiah from speculative attack.
"I see it as a preemptive strike to avert international
speculators from attacking the rupiah for fear of the property
sector collapsing as it did in Thailand," James said.
He said the property market in Indonesia was still healthy,
compared to those in Thailand, the Philippines and even Malaysia.
To maintain confidence in the rupiah, James said local
corporations should maintain prudent financial management by
avoiding short positions on the dollar. (rid)
Currencies -- Page 12