Rupiah weakness hurting manufacturing: Kadin

Rupiah weakness hurting manufacturing: Kadin

JAKARTA (JP): Chairman of the Indonesian Chamber of Commerce
and Industry (Kadin) Aburizal Bakrie said on Monday that if the
rupiah continued to stay at about Rp 9,000 per U.S. dollar, the
country's manufacturing sector would have to cut production in a
bid to halt losses.

Aburizal said that the ideal exchange rate level for the
manufacturing sector was about Rp 7,000 per dollar.

He explained that a weak rupiah would result in higher costs
of imported raw materials, which could not be automatically
transferred to local customers as purchasing power had been
reduced by the more than two-year economic crisis.

"The drop in the rupiah to about Rp 9,000 is really hurting
the business sector," he said.

Aburizal was speaking to reporters at the House of
Representatives. He was scheduled to meet with House Commission
IX for the state budget and banking, but the hearing was delayed
as only a number of the commission members showed up.

The rupiah has been badly hit recently, particularly due to
domestic security and political uncertainty ahead of a key August
General Session of the People's Consultative Assembly (MPR), the
country's highest legislative body.

Many fear that the House and MPR members will use the annual
meeting to impeach the President, who has in recent months been
engaged in a tug of a war with the legislators.

The rupiah ended stronger at Rp 9,315 per U.S. dollar late on
Monday, compared to Rp 9,320 on Friday. This is much lower than
the government's Rp 7,000 target for this year.

Coordinating Minister for the Economy, Finance and Industry
Kwik Kian Gie said late last week that the government and Bank
Indonesia would not take any special action to prop up the rupiah
because the current weakness was only temporary and due to
"noneconomic factors".

"If we take action, it will only cause the market to think
that there's something serious going on," he said.

Kwik was confident that the rupiah would be stronger once
current political problems had been resolved, as the country's
economic fundamentals had improved.

Aburizal also urged the House to immediately take measures to
ensure legal certainty for investors to do business in the
country.

He said that the illegal seizure of company assets, including
land, by the people could prompt investors to withdraw from the
country.

"There has to be an industrial peace," he said.

He said that legal certainty and the security condition were
crucial to reviving business confidence in the country and to
help strengthen the local currency.

Aburizal was optimistic that if domestic social and political
uncertainty subsided, the rupiah would strengthen again.

He said that the country's key economic factors were positive
enough to support a stronger exchange rate of the rupiah.

He expected the rupiah to strengthen after August's MPR
session.

Elsewhere, Aburizal also said that the Indonesian Bank
Restructuring Agency (IBRA) must press ahead with its asset
disposal program to help revive investor confidence in the
economy.

"IBRA must speed up its asset sale program," he said, adding
that the government should not be reluctant to sell at a
discount.

He added that a resolution to the country's massive corporate
sector overseas debt was crucial to rebuilding confidence.

He also said that the government's economics team must be well
coordinated in taking economic measures to revive confidence,
particularly among foreign investors. (rei)