New minister Fuad vows to stabilize battered rupiah

JAKARTA: The newly appointed minister of finance, Fuad Bawazier, said Saturday that he would focus on efforts to quickly stabilize the ailing rupiah, continue banking reform, and recover overseas confidence in the country's shattered private sector.

Fuad explained that the rupiah's current unrealistic exchange rate against the U.S. dollar has caused many activities to run below normal conditions and widespread negative impacts.

"It's a tough job," he said over the weekend about his new position, pointing to the country's current currency crisis, the worst in 30 years.

He said that a rate of between Rp 4,000 and Rp 5,000 to the dollar should makes sense, when compared to crisis-hit currencies of the Philippines, Thailand, Malaysia, and South Korea. Any higher than that and the rupiah would be very much undervalued, he added.

Fuad said that besides having better economic fundamentals, the rupiah has depreciated the greatest when compared to the peso, baht, ringgit and won.

Fuad said Indonesia has not made any decision on whether to peg the rupiah to a foreign currency, the dollar, at a fixed exchange rate via a controversial currency board system. Fuad is also a key official of the country's economic and finance resilience council formed by President Soeharto to deal with the crisis.

The appropriate policies to be implemented will be reviewed by the new cabinet and discussed with Indonesia's bilateral and multilateral counterparts, he added.

Following the baht devaluation in July, other Southeast Asian currencies,, including the rupiah, took a dive. The rupiah plunged to its lowest level of Rp 17,000 in January to the greenback compared to Rp 2,450 in July.

President Soeharto agreed to an IMF-sponsored economic reform program in January in exchange for a $43 billion in bailout funds.

The President, however, seemed to back off from the program in February, when he indicated that he might implement the currency board for quick stability in the rupiah. This angered Indonesia's donor countries and the IMF.

Fuad said that the currency crisis has badly affected all sectors of society, including the press, which is facing sharp cuts in advertising revenue and skyrocketing newsprint price.

The country's exporters, which import a significant proportion of raw materials, have also been harshly affected, he added.

He stressed that the most badly affected were the low-income people, who had to face soaring prices of basic items because the country's production system had some 50 percent import content.

"So, we must now be solid in voicing the national interest. We often sing the song composed by others," Fuad said, adding that it is important not to make activities or statements that would be counterproductive.

He explained that the current volatility of the rupiah would only benefit forex traders, who had made hefty profits and were willing to put some of it into promotion by creating groundless rumors.

Fuad said that creating a stronger banking system and rebuilding confidence in the country's beleaguered private businesses were also among his top priorities.

Following the currency crisis, most Indonesian companies are technically bankrupt, as the falling rupiah makes it impossible for them to service their overseas debts.

Commenting on the new position of state minister to supervise the operation of state companies, Fuad said: "I'm glad there's a new minister to oversee state-owned companies in the new cabinet," adding that this would ease the duty of finance minister, who could focus on macroeconomic issues.

Tanri Abeng, one of Indonesia's prominent business executive, was appointed to the new position.

Fuad explained that state companies were a great national asset because they could generate various benefits, including creating employment, providing foreign exchange reserves and boosting confidence in the financial market as well as in the general economy of the country.

Before his position as the new finance minister, Fuad, 49, had been the director general of tax since 1993.

The U.S.-graduated economist, with many years of experience in the Ministry of Finance, started receiving wide press coverage from 1995 with his appointment in several high-profile organizations.

They include president of the Jakarta Stock Exchange's board of commissioners, in which President Soeharto's daughter Siti Hediati Prabowo is also a member; treasurer of Yayasan Sejahtera Mandiri, a foundation controlled by the President; and a key official of the economic and finance resilience council, formed by the President to deal with the current crisis.

Fuad, who is replacing Mar'ie Muhammad as finance minister, is also commissioners at state-owned banks Bank Dagang Negara and Bank Bumi Daya. (08)