Opposition parties offer alternatives
<p>Opposition parties offer alternatives</p><p> JAKARTA (JP): Two major opposition political parties may
introduce fundamental changes in Indonesia' economic policy if
they win the upcoming June 7 general election.</p><p>The Indonesian Democratic Party of Struggle (PDI Perjuangan)
said on Thursday it would seriously consider reintroducing a
fixed exchange rate system to bring the rupiah to around Rp 5,000
against the US dollar in order to spur an economic recovery.</p><p>The party's economic adviser, Kwik Kian Gie, said the crippled
business sector could repay its debts and resume production only
if the rupiah strengthened to the Rp 5,000 level, especially
because the manufacturing industry relied heavily on imported raw
materials.</p><p>He was addressing a seminar on Indonesian business prospects,
in which the economic advisers of four other major political
parties, including the ruling Golkar Party, also presented their
economic platforms.</p><p>Leading opposition parties the National Awakening Party (PKB),
the National Mandate Party (PAN) and the United Development Party
(PPP) said they would make creating a system of good governance
and providing greater support to small and medium-size businesses
their top priority.</p><p>The ruling Golkar Party said it would focus on restructuring
the debts of small and medium-size businesses in order to restore
their production rates to 1996 levels.</p><p>"I think in this situation, we have to go back to that
system," Kwik said, referring to the fixed exchange rate system
which Indonesia employed between the late 1960s and the 1970s.</p><p>The country has been devastated by the current economic
crisis, which began in August 1997 when the rupiah collapsed
after the government abandoned its managed float system and
allowed the rupiah to move in a free float system.</p><p>The rupiah plunged to more than Rp 17,000 to the dollar in
January, compared to around Rp 2,400 to the dollar before the
crisis began. Strengthening the rupiah is the cornerstone of the
country's economic reform programs.</p><p>The rupiah is currently hovering at around Rp 8,800 to the
dollar.</p><p>Kwik said his party would endeavor to reintroduce the fixed
exchange rate system if it won the general election, but added it
would first seek international support for such a drastic move.</p><p>He explained that the support of the international community
was essential because the country would need more than US$20
billion in foreign loans to bolster its foreign exchange reserves
in order to make the system credible.</p><p>Early last year, then president Soeharto mulled reintroducing
the fixed exchange rate system under the currency board to
stabilize the currency, but the plan was dropped after strong
opposition from international creditors, most notably the
International Monetary Fund (IMF).</p><p>Kwik urged the IMF, which has been organizing a multibillion
dollar economic bailout for Indonesia, to review its programs for
the crisis-hit country.</p><p>"Do they (the IMF) really believe that by following this (the
IMF's reform programs) the rupiah will be strengthened," Kwik
asked.</p><p>However, PAN secretary-general Faisal Basri, who also is an
economist, disagreed with Kwik.</p><p>"Introducing a fixed exchange rate system will require a
strong banking sector," he said.</p><p>He prefers a capital control system like the one currently
employed by Malaysia.</p><p>He said such a system would quell currency speculation because
it would curb the full convertibility of the rupiah against
foreign currencies.</p><p>He said a capital control system would allow an immediate drop
in domestic interest rates, fueling economic recovery.</p><p>Indonesia is scheduled to hold its first free and open general
election since the fall of former president Soeharto last May.
Many foreign investors are postponing investments in the country
to await the outcome of the election.</p><p>Chairman of the Indonesian Chamber of Commerce and Industry
Aburizal Bakrie hailed the five political parties for their
economic platforms, which he saw as "probusiness".</p><p>"We should not be afraid of the general election or the
country's next government because it's clear these parties are
probusiness," he said.</p><p>He urged investors not to wait for the completion of the
election before investing in the country.</p><p>PAN chief Amien Rais said he was optimistic about the future
of the economy because of the country's rich natural resources,
cheap labor and large potential domestic market.</p><p>Amien pledged to honor the state's business contracts with
foreign investors if he won the election, and said he would
encourage businesspeople to return the money they moved overseas
back to the country. (rei)</p>
introduce fundamental changes in Indonesia' economic policy if
they win the upcoming June 7 general election.</p><p>The Indonesian Democratic Party of Struggle (PDI Perjuangan)
said on Thursday it would seriously consider reintroducing a
fixed exchange rate system to bring the rupiah to around Rp 5,000
against the US dollar in order to spur an economic recovery.</p><p>The party's economic adviser, Kwik Kian Gie, said the crippled
business sector could repay its debts and resume production only
if the rupiah strengthened to the Rp 5,000 level, especially
because the manufacturing industry relied heavily on imported raw
materials.</p><p>He was addressing a seminar on Indonesian business prospects,
in which the economic advisers of four other major political
parties, including the ruling Golkar Party, also presented their
economic platforms.</p><p>Leading opposition parties the National Awakening Party (PKB),
the National Mandate Party (PAN) and the United Development Party
(PPP) said they would make creating a system of good governance
and providing greater support to small and medium-size businesses
their top priority.</p><p>The ruling Golkar Party said it would focus on restructuring
the debts of small and medium-size businesses in order to restore
their production rates to 1996 levels.</p><p>"I think in this situation, we have to go back to that
system," Kwik said, referring to the fixed exchange rate system
which Indonesia employed between the late 1960s and the 1970s.</p><p>The country has been devastated by the current economic
crisis, which began in August 1997 when the rupiah collapsed
after the government abandoned its managed float system and
allowed the rupiah to move in a free float system.</p><p>The rupiah plunged to more than Rp 17,000 to the dollar in
January, compared to around Rp 2,400 to the dollar before the
crisis began. Strengthening the rupiah is the cornerstone of the
country's economic reform programs.</p><p>The rupiah is currently hovering at around Rp 8,800 to the
dollar.</p><p>Kwik said his party would endeavor to reintroduce the fixed
exchange rate system if it won the general election, but added it
would first seek international support for such a drastic move.</p><p>He explained that the support of the international community
was essential because the country would need more than US$20
billion in foreign loans to bolster its foreign exchange reserves
in order to make the system credible.</p><p>Early last year, then president Soeharto mulled reintroducing
the fixed exchange rate system under the currency board to
stabilize the currency, but the plan was dropped after strong
opposition from international creditors, most notably the
International Monetary Fund (IMF).</p><p>Kwik urged the IMF, which has been organizing a multibillion
dollar economic bailout for Indonesia, to review its programs for
the crisis-hit country.</p><p>"Do they (the IMF) really believe that by following this (the
IMF's reform programs) the rupiah will be strengthened," Kwik
asked.</p><p>However, PAN secretary-general Faisal Basri, who also is an
economist, disagreed with Kwik.</p><p>"Introducing a fixed exchange rate system will require a
strong banking sector," he said.</p><p>He prefers a capital control system like the one currently
employed by Malaysia.</p><p>He said such a system would quell currency speculation because
it would curb the full convertibility of the rupiah against
foreign currencies.</p><p>He said a capital control system would allow an immediate drop
in domestic interest rates, fueling economic recovery.</p><p>Indonesia is scheduled to hold its first free and open general
election since the fall of former president Soeharto last May.
Many foreign investors are postponing investments in the country
to await the outcome of the election.</p><p>Chairman of the Indonesian Chamber of Commerce and Industry
Aburizal Bakrie hailed the five political parties for their
economic platforms, which he saw as "probusiness".</p><p>"We should not be afraid of the general election or the
country's next government because it's clear these parties are
probusiness," he said.</p><p>He urged investors not to wait for the completion of the
election before investing in the country.</p><p>PAN chief Amien Rais said he was optimistic about the future
of the economy because of the country's rich natural resources,
cheap labor and large potential domestic market.</p><p>Amien pledged to honor the state's business contracts with
foreign investors if he won the election, and said he would
encourage businesspeople to return the money they moved overseas
back to the country. (rei)</p>