New minister Fuad vows to stabilize battered rupiah

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)