Prudent business management essential: Tunky

JAKARTA (JP): Minister of Industry and Trade Tunky Ariwibowo urged local entrepreneurs yesterday to manage their businesses prudently in response to a less accommodating Indonesian economy.

"Don't expect things to return to the way they were during the golden age," Tunky told members of the Chamber of Commerce of Industry (Kadin) at a panel discussion.

The monetary turmoil, which has depreciated the rupiah's value by about 50 percent against the U.S. dollar since early July, is projected to slash the country's economic growth to 6 percent this year and 5 percent next year from above 7 percent in previous years.

Unlike in prior years, businesses would face difficulty getting foreign loans, he said.

The tight monetary policy imposed by the government would also make domestic loans more expensive.

Tunky said, however, the depreciation of the rupiah would make Indonesian exports more competitive.

He was optimistic that exports would continue to increase next year.

In the first semester of this year, the monthly balance of payments had experienced a surplus of between US$450 million and $500 million.

Export companies must consolidate and improve their operations in order to increase their exports, he said.

The government also would continue to work to reduce imports of raw materials for local companies by creating incentives for the establishment of upstream and component industries.

The government would also lower sales taxes for domestic transactions between exporters and the export-supporting industry, he said.

However, the most important thing for the business sector was to improve its liquidity, he said.

Asked whether the central bank would cut interest rates to help export-oriented companies, Tunky said the government could not subsidize the export sector, as it would violate World Trade Organization regulations.

Indonesia had signed international agreements that it would not subsidize its exports, he said.

If these rules were broken, importing countries would impose countervailing duties on subsidized Indonesian exports, he said.

"The government and the business sector are working together now to lower interest rates across the board," he said.

He said he had met with Bank Indonesia governor Soedradjad Djiwandono and the directors of other banks to discuss problems regarding export-oriented companies, he said.

He said export-oriented companies were urged to exchange their dollar-denominated revenues with rupiah through the swap and forward facility provided by the government.

The swap facilities would ensure that exporters would be able to buy dollars at approved conversion rates to finance their imports.

However, many entrepreneurs still kept their dollars, for fear they would not get the same value whenever they needed dollars again, he said.

"Many people still do not know that they are guaranteed not to lose money if they sell dollars through the swap and forward facility," he said.

Tunky said most exporters in the country consisted of small and medium entrepreneurs.

Yesterday's discussion was held by Kadin during its two-day national working meeting which started Wednesday. (das)